Malaysia’s Exchange 106 commands highest office rents in Kuala Lumpur

[KUALA LUMPUR] The second-tallest building in Malaysia – the Exchange 106 skyscraper in the heart of the new Tun Razak Exchange (TRX) financial and business hub – is seeing some sky-high rents these days.

The asking rent at this 453.6-metre tall skyscraper has gone up to as much as RM13 (S$3.70) per square foot (psf), making it the highest in Kuala Lumpur.

Exchange 106 – the second-tallest building in the country after the newly opened Merdeka 118 skyscraper – has 92 column-free office floors, with each averaging 34,000 square feet (sq ft).

Some online property listings have put the monthly asking rent for offices ranging from RM9 psf (for an entire floor) to RM13 (for smaller office units).

For instance, an office with a built-up area of 7,000 sq ft is asking for a monthly rental of RM91,000, or an average RM13 psf.

Another full-floor rental listing with a built-up area of 34,535 sq ft has a monthly rental of RM310,800, averaging RM9 psf.

TRX City, a subsidiary of Malaysia’s Finance Ministry, is the master developer of TRX, which comprises retail, hotel, residential and office components. It also has a direct connection to Tun Razak Exchange mass rapid transit (MRT) station.

The development has an estimated gross development value of RM40 billion, with key investors including Australia-based Lendlease, Mulia Group, HSBC Bank Malaysia, Affin Bank, Prudential Malaysia and China Communications and Construction Group.

In a recent interview with The Business Times (BT), TRX City chief executive Azmar Talib noted that Exchange 106 is the only purpose-built office for leasing. It is expected to achieve an occupancy rate of 70 per cent this year.

However, he declined to disclose the tenant profiles. Some earlier local media reports said that about 47 per cent of the 2.6 million sq ft of floor area in the building had secured tenants.

Property agents told BT that it is rare for offices in Kuala Lumpur to fetch a monthly rental above RM10 psf, given the oversupply in the capital.

As at end-2023, there is more than 58 million sq ft of office space in the city, with another 2.5 million sq ft expected to be completed this year, according to data by Knight Frank.

Daniel Ma, the deputy managing director of property consultancy firm Nawawi Tie Leung, said the average monthly rental of newly built grade A offices ranges from RM8 to RM9 psf, while offices in older buildings could go as low as RM6 psf.

He noted that office rentals at the iconic Petronas Twin Towers – located about 4 km away from Exchange 106 – is priced at around RM10 psf.

CBD Properties real estate consultant Ng Jia Yi said that the Petronas Twin Towers remains popular among oil and gas players, while tech and financial industry firms are increasingly attracted to other buildings that have convenient access to public transport systems.

“The retail-led integrated development and direct access to the MRT are the key factors driving the demand for offices in TRX. The newly announced international financial centre (IFC) status is the icing on the cake for the development,” she added.

In February, Malaysian Prime Minister Anwar Ibrahim announced the launch of TRX as the country’s IFC, a unique status that offers companies that establish their base within the precinct to enjoy incentives such as tax deductions and building allowances.

Azmar said that TRX was built to enhance Kuala Lumpur’s attractiveness as an international address. He added that TRX has helped to revitalise the surrounding communities and improve the accessibility of the Imbi and Pudu neighbourhoods.

“With TRX hosting the only MRT interchange station in the city centre, the resulting increase in property value to KL’s benchmark demonstrates how TRX has transformed the previously under-developed Imbi area,” said Azmar.

Benjamin Chow, MSCI’s head of Asia real assets research, said that TRX’s IFC status is proof of the Malaysian government’s commitment to the project’s long-term success, with the incentives set to be a pull factor for both tenants and investors.

The elevated interest rates for most major markets globally and heightened macroeconomic volatility continuing into 2024 have led to a “flight to quality” by investors and occupiers.

“The IFC status offers the prestige that comes with its exclusivity, and this could be its advantage against the broader backdrop of global investment trends,” said Chow.

Apart from office space, the retail component of TRX has some 400 stores – including luxury brands such as Louis Vuitton, Gucci and Dior – with a total of 120,773 sq metres of net lettable space.