In Knight Frank Malaysia’s latest Real Estate Highlights for 1H2020, it said to expect downward pressure on rental and occupancy levels in the oversupplied Klang Valley office market as the gap between supply and demand continues to widen due to the Covid-19 pandemic.

“The sense of growing uncertainty surrounding supply and demand chains will lead to [less] leasing or transactional activity as business owners and investors review or put on hold their real estate decisions,” it said.

However, it added that the recent cut in Overnight Policy Rate (OPR) to 1.75% in July 2020 is expected to have a positive impact to support property yields, releasing the upward pressure.

“[Nonetheless], the magnitude of Covid-19’s effect upon the real estate market is currently unknown and will largely depend on both the scale and longevity of the outbreak,” it said.

Moving forward, the report said working from home may be the new normal for some while social distancing measures may lead to a reversal of open office trend.

Additionally, Knight Frank Malaysia anticipates an increased demand for smaller office space.

“Co-working or flexible space may be a good option for new occupiers and businesses looking to navigate in the near term before committing to a longer-term plan.”