CB Richard Ellis Malaysia Sdn Bhd (CBRE) expects office rentals in Kuala Lumpur to stabilise in the first half of 2010, barring any major economic setbacks.

According to a special report by CRBE Research, “Office rentals in Kuala Lumpur peaked at the end of the fourth quarter of 2008 and softened moderately thereafter by about 15 per cent as at the end of the fourth quarter of 2009

“Rentals for Grade A offices stood at RM7 psf at the end of 2009, similar to the first quarter of 2009 level.”

In tandem with comparable cities around Asia, vacancy and rentals began to level out in the fourth quarter of 2009 as the market downcycle approached its end and leasing activity gradually began to pick up across the region.

Vacancy rates stabilised at 13 per cent by year end 2009 despite the addition of 4.76 million sq ft of new supply from office buildings completed last year.

Chris Boyd, CBRE Malaysia’s executive chairman said, “The combination of modern infrastructure, quality facilities and comparatively cheap rentals makes Kuala Lumpur a highly attractive location for any prospective multinational considering a move. Kuala Lumpur offers a consistent cost advantage which is not a flash in the pan, as growth in the supply of new buildings serves to smooth any potential fluctuations in rental levels.”

Despite weakening rentals and slightly higher yield expectations, office capital values are expected to remain steady throughout 2010 ranging between RM800 to RM1,200 psf.

CBRE feels that the market has not yet experienced the full impact of the last budget announcement which further liberalised the acquisition of property investments by foreigners.

“With no requirements for local equity, we expect to see an increasing number of overseas institutions seeking investment grade property in Malaysia 2010 and beyond,” said Paul Khong, executive director of CBRE.

Allan Soo, managing director of CBRE said, “Kuala Lumpur offers a wide choice of buildings and locations at rentals which are going to remain extremely competitive in the foreseeable future.”

In end January 2010, Regroup changed its name to CBRE after signing an affiliate agreement with CB Richard Ellis Group Inc.