In recent years, many residential areas have been redeveloped into commercial, corporate and mixed-use locations, especially in Kuala Lumpur, where the central business location continues to swell.
One such locality is KL Eco City (KLEC), which was formerly Kampung Haji Abdullah Hukum.
This development has evolved into a sought-after corporate location with more than 2.5 million sq ft of office space where many corporations have opened their headquarters.
Developed as a joint venture between S P Setia Bhd and Kuala Lumpur City Hall, the RM7 billion integrated, mixed-use development is situated off Jalan Bangsar, next to Mid Valley City, and surrounded by established commercial precincts.
KLEC comprises three residential towers, three office towers, one serviced apartment tower, a retail podium, three clusters (four blocks per cluster) of boutique offices and a one-strata office tower. There is also a multi-storey car park and one mosque.
The development took off in 2011, and it has attracted numerous economic clusters, such as finance, information technology, oil and gas, corporate, consulting, co-working spaces, logistics and wellness, said Propnex Realty Sdn Bhd head of corporate services, mergers and acquisitions Danny Gan.
“The successful implementation of the master plan in KLEC emphasises a work-life balance, similar to the concepts of KL Sentral, Mid Valley and Bangsar South,” he told Property Advisor.
Close to KLEC are Tenaga Nasional Bhd’s upcoming HQ Campus Phase 2, Bangsar; City Motor’s 46-storey Holiday Inn KL Bangsar and LOT 61 Bangsar by Permodalan Hartanah Bhd.
The corporates that have offices at KLEC include Gibraltar BSN, Zurich Insurance, RAM Holdings Bhd, Yinson Holdings Bhd, Samsung Malaysia Electronics Sdn Bhd, The Institute of Corporate Directors Malaysia, Egon Zehnder International, WeWork Malaysia, J&T Express and the Phillip Wain Group.
Property consultancy Knight Frank executive director Teh Young Khean said KLEC has great potential as it has all the right attributes for a successful development.
“Since the completion of the mall and office towers in 2017, KLEC has seen an uptick in occupancy and has been performing well due to its strategic location in KL Fringe.
“Companies have been drawn to KLEC for its increasingly vibrant environment and wide variety of amenities,” he said.
Since the opening of the pedestrian link bridge in 2019, from Abdullah Hukum LRT station to Mid Valley City, KLEC has boosted its ecosystem for tenants to enjoy the facilities of both developments, said Teh.
“It has a two-tier internal road system, comprising an upper and a lower tier for smoother traffic flow, with six main roads that provide direct connections to the Federal Highway, New Pantai Expressway, Jalan Maarof and Jalan Bangsar,” he said.
He noted that KLEC ticks the boxes for the main considerations of tenants, such as accessibility to public transport, attractive rental rates, great selection of food, excellent IT infrastructure, amenities and security.
KLEC experiences slowdown during MCO
According to Teh, at the beginning of the MCO, leasing activity slowed down immensely as real estate plans were either delayed or cancelled altogether as companies tried to control their cash flow and limit spending.
“As restrictions have slowly begun to lift, we have seen the market start to come back to life and many companies are relooking their real estate portfolios.
“Many are looking at cost-saving opportunities. But most corporate real estate planners prefer a wait-and-see approach.”
He said the repercussions of Covid-19 on the office market have yet to be seen. However, most landlords in the Klang Valley, including KLEC, are ready to offer competitive rental packages, including rent-free periods and attractive renewal terms to entice tenants.
The current asking rate remains the same post-MCO, with Mercu 2 and Mercu 3 at RM7.50 and RM6.50 per sq ft (psf) respectively, he added.
“Mercu 2 in particular has reached a healthy level of occupancy with strong anchor tenants, and should see its rental rates stabilise. Rents at the boutique offices and strata office tower are also hovering around RM4 to RM5 psf.”
Raine and Horne International Zaki + Partners head of sales and corporate advisory Gideon Liau said demand for smaller office spaces is expected to rise, and those offering larger office spaces need to adjust to the current situation.
“I would not go as far as to say large corporate office spaces will be obsolete, but the overall design will have to change, based on customer preference and the new normal.”
At this juncture, Liau said, the trend for corporates is to move toward downsizing their main office and practising flexible working arrangements with half of the workforce working from the office and the other half working from home.
He revealed that some landlords are receiving enquiries from e-commerce and pharmaceutical companies that are expanding.
“While the leasing market continues to favour tenants, it is the best time for large companies, especially those in the ‘right’ industries, to relocate and negotiate a better deal,” said Liau, adding that there will be no increase in rental rates in the short term.
Most of the tenants of the residential component at KLEC are expatriates since the rents for luxury condominiums there are affordable compared with other luxury condominiums within walking distance of the LRT and shopping centres.
Knight Frank associate director Kelvin Yip said KLEC’s residential component is expected to continue to grow since it is in a development with abundant amenities.
“With sizes ranging from 657 to 3,993 sq ft, the rents range from RM3 to RM4.60 psf, depending on the furnishing, floor level and view.
“There is a good mix of local and expatriate tenants, however, the presence of expatriates is trending upward.”
Liau said the minimum rental rate is RM2,800 for a one-bedroom condominium, and the maximum is up to RM7,500 for a duplex.