pg. 53 Approach to Value Creation Integrated Annual Report 2025 PORTFOLIO CAPITAL OFFICE SEGMENT OUTLOOK Klang Valley: In 2025, the office sector showed slight improvements in occupancy levels across the Klang Valley and Kuala Lumpur city centre, driven by the availability of new Grade A and green-certified buildings. The office sector movement was also marked by major movements in the banking and financial sector into the Tun Razak Exchange (“TRX”) compound. While occupancy levels in prime offices continued to trend upwards, older nonprime offices recorded a steady decline as tenants shifted towards newer, prime-grade spaces. Newer office towers are increasingly adopting green practices and certifications, making them an appealing choice for multinationals and ESG-focused enterprises. The flight to quality is expected to continue into 2026, where demand for prime-grade offices is anticipated to hold steady, while the gap widens between older, non-prime assets in fringe locations. This is further exacerbated by newer offices offering the latest lifestyle amenities to foster a collaborative work environment, catering to the preferences of a younger workforce and indirectly shaping tenant demand and leasing decisions. Older offices will face pressure to maintain occupancy levels amid rising rents. Johor: In 2025, Johor’s office sector in the city centre and areas within the vicinity of the CIQ complex received steady demand, supported by the appeal of connectivity to the RTS Link for cross-border multinationals and regional businesses requiring frequent travel to and from Singapore. There was no new supply of offices in 2025, hence overall occupancy levels held steady at 55.0%, while gross rents increased from RM4.00 per sqft to RM4.50 per sqft in 2025. Similarly, tenants in Johor are seeking modern office spaces integrated with lifestyle amenities, while also having excellent transit connectivity. A particular segment, such as co-working spaces, continues to expand its presence as Johor emerges as a cross-border service hub following the establishment of the JS-SEZ, with an increasing number of entrants taking up space in strategically located office spaces. Offices with transit connectivity in city-fringe areas are expected to see steady rental growth as incoming supply remains limited in 2026.
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