KUALA LUMPUR: Kuala Lumpur’s commercial property market remained resilient in the second quarter of 2026, with stronger office leasing and retail demand offsetting rising vacancy in the industrial sector as a wave of new warehouse supply entered the market, according to JLL Malaysia.
The property consultancy said the office market continued to benefit from flight-to-quality demand, while the retail sector was supported by robust consumer confidence and a recovery in tourism. However, the industrial market faced short-term pressure as new Grade A warehouse completions outpaced leasing activity.
In the office segment, net absorption reached 250,000 sq ft during the quarter, driven primarily by automotive and fintech occupiers. With no new office completions during the period, the overall vacancy rate fell 0.4 percentage points quarter-on-quarter to 14.8%.
Average rental rates continued to strengthen, underpinned by demand for green-certified and future-ready office buildings, particularly in established business districts such as Tun Razak Exchange (TRX) and Bangsar South. Gross rents rose 1.6% year-on-year to RM7.47 per sq ft per month, while year-to-date net absorption reached 554,900 sq ft.
JLL said the recently introduced Malaysian Digital Location Recognition (MLDR) framework is expected to further widen the performance gap between premium and secondary office buildings by establishing formal certification standards for technology-ready and ESG-aligned assets.
“The framework is likely to accelerate occupiers’ preference for high-quality buildings with stronger digital infrastructure and sustainability credentials.”
The industrial sector saw leasing activity rebound after the Chinese New Year and Hari Raya festive period, supported by demand from the electrical and electronics (E&E), medical, automotive and fast-moving consumer goods (FMCG) sectors.
However, the completion of the Shah Alam International Logistics Hub added 2.8 million sq ft of Grade A warehouse space, lifting total stock to 39.58 million sq ft and pushing the overall vacancy rate to 9.9%.
Although year-to-date net absorption reached 972,800 sq ft, it lagged behind the influx of new supply, highlighting the challenge of balancing robust occupier demand with an expanding development pipeline.
The retail market remained one of the strongest-performing segments, supported by resilient domestic spending and improving international visitor arrivals.
With no new retail completions during the quarter, vacancy rates continued to improve across both city centre and suburban locations. City Centre vacancy declined to 9.2%, while suburban vacancy eased to 18.2%. Gross rents in the City Centre rose 0.8% year-on-year to RM34.50 per sq ft per month.
Investment activity also remained healthy, with KIP REIT completing the acquisition of Setapak Central Mall for RM435 million during the quarter. The 514,777 sq ft shopping mall reported an occupancy rate of 99.89% as at February 2026.
Meanwhile, the prime residential market continued to demonstrate resilience, supported by demand from high-net-worth Malaysians, expatriates and regional investors.
Buyer preferences increasingly shifted towards projects offering better connectivity, lifestyle amenities and sustainability features in established locations such as KLCC, Bukit Bintang and other mature neighbourhoods.
Developers maintained a disciplined approach to new launches amid elevated construction costs and financing uncertainties, focusing on lower-density, premium-positioned developments in land-constrained locations.
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