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- Demand for older, non-prime offices continues to decline as tenants favour modern, energy-efficient spaces in well-connected locations in newer prime office buildings.
KUALA LUMPUR (Jan 7): Older office buildings in the Klang Valley are increasingly facing refurbishment or repurposing as overall office market conditions remain weak heading into 2026.
At a briefing on Wednesday (Jan 7), CBRE said the average office occupancy in the Klang Valley stands at 79.2% in 2025, reflecting subdued demand across the market, citing data from the Malaysia Real Estate Market Outlook 2026 report by CBRE | WTW.
Demand for older, non-prime offices continues to decline as tenants favour modern, energy-efficient spaces in well-connected locations in newer prime office buildings.
Although the rental rate in prime office buildings has risen by about 4%, older buildings continue to come under pressure. “As a result, these underperforming non-offices are likely to be repurposed. This follows recent trends such as office-to-hotel conversions,” said director of research and consulting Mary Kurien.
With more than five million sq ft of new office space expected to be completed in 2026, CBRE said competition is set to intensify, further challenging older office stock.
Recent examples include the conversion of Wisma KFC into the Hyatt Centric Kuala Lumpur hotel and Wisma Lirava into Else Kuala Lumpur, a boutique hotel.
CBRE noted that similar office-to-hotel and office-to-residential conversions are likely to increase, supported by tax incentives announced under Budget 2026 that encourage the repurposing of commercial buildings.
Beside the office sector, retail property performance in the Klang Valley remains uneven. Prime shopping malls such as Suria KLCC, Pavilion Kuala Lumpur and Mid Valley Megamall continue to record occupancies above 90%, while older and smaller malls face lower occupancy rates. Kurien noted that tenant demand was mainly led by the food and beverage sector, followed by the fashion and accessories sector.
In the report, around 4.2 million sq ft of new retail space has recently been completed or is due to open this year and retailers are awaiting the Merdeka 118 Mall opening, which is expected in the third quarter of 2026.
“Although higher living costs may affect consumer spending, this should be partially offset by the Visit Malaysia 2026 initiatives as well as the relaxed visa policies which are expected to support footfall mainly at prime tourist-focused malls,” said Kurien.
The hotel sector showed improvements, supported by higher tourist arrivals and major events in conjunction, partially due to the Asean Summit 2025. About 2,200 new hotel rooms were added over the past year, mainly in the five-star category, with another 2,000 rooms under construction.
Overall, CBRE’s Malaysia Real Estate Market Outlook 2026 report paints the Klang Valley property market to remain stable, with demand increasingly focused on newer, well-located assets, while older buildings face the need to adapt through upgrades or repurposing.
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