KUALA LUMPUR – Jan 7, 2026: Older office buildings in the Klang Valley are increasingly under pressure to undergo refurbishment or be repurposed as overall office space demand in Kuala Lumpur and Selangor remains soft heading into 2026.
According to CBRE’s Malaysia Real Estate Market Outlook 2026, the average office occupancy in the Klang Valley stood at 79.2% in 2025, highlighting a subdued market, particularly for older, non-prime properties. Tenants are increasingly favouring modern, energy-efficient offices in prime locations, leaving older office buildings struggling to retain tenants.
“Underperforming offices are likely to be repurposed, following trends such as office-to-hotel conversions,” said Mary Kurien, Director of Research and Consulting at CBRE. While rental rates for prime office buildings have risen roughly 4%, older stock continues to face pressure, especially with over 5 million sq. ft. of new office space expected to complete in 2026.
Recent examples of repurposing include the transformation of Wisma KFC into the Hyatt Centric Kuala Lumpur hotel and Wisma Lirava into Else Kuala Lumpur, a boutique hotel. CBRE expects such office-to-hotel or office-to-residential conversions to increase, particularly with Budget 2026 tax incentives encouraging adaptive reuse of commercial properties.
The retail sector in the Klang Valley remains uneven. Prime shopping malls—including Suria KLCC, Pavilion Kuala Lumpur, and Mid Valley Megamall—maintain occupancies above 90%, while older and smaller malls face lower rates. Tenant demand is driven primarily by the food and beverage sector, followed by fashion and accessories.
Approximately 4.2 million sq. ft. of new retail space has been completed or is slated for completion in 2026, with the highly anticipated Merdeka 118 Mall expected to open in the third quarter. While higher living costs may slightly dampen consumer spending, initiatives like Visit Malaysia 2026 and relaxed visa policies are projected to support footfall at prime, tourist-focused retail properties in Kuala Lumpur and Selangor.
The hotel segment in the Klang Valley has improved, supported by rising tourist arrivals and major events such as the Asean Summit 2025. Over the past year, around 2,200 new hotel rooms—mainly five-star—were added, with an additional 2,000 rooms under construction.
CBRE’s outlook indicates that demand will increasingly focus on well-located, modern offices and retail properties, while older buildings must adapt through refurbishment, upgrades, or conversion to remain relevant. For investors in office space in Bukit Jalil, industrial land in Selangor, factories in Puchong, or commercial property in KL, this trend underscores the importance of selecting assets with strong connectivity, modern amenities, and potential for adaptive reuse.
Yao Mu Realty, based in Kuala Lumpur, Malaysia, specializes in industrial real estate for factories and land, delivering professional and efficient solutions.
Posted by Yao Mu Realty Sdn Bhd on 7 Jan 26
Malaysia