KUALA LUMPUR, Jan 19 — Office space in the country’s capital and its surrounding areas is expected to experience surplus as demand continues to dip from 2016, a property investment firm said today.

JLL Malaysia pointed that this scenario is generally due to a slump in the financial services and petroleum industry after some offices in Kuala Lumpur are either consolidated, shut down or downsized.

"There will be a rise in vacancy rate, which will indefinitely put pressure on rents and capital values," said the firm's country head Y.Y. Lau in a media briefing at InvestKL's office.

As for rental, Lau said the central business district (CBD) and fringe markets are expected to suffer a drop of up to 10 per cent this year.

"CBD prime office rents fell in 2016 and we except rents as well as capital values to decline further in 2017," she said.

JLL anticipates capital values of office spaces in the city to reduce by 0.3 per cent this year.

In some prime areas, Lau said rentals for office spaces hovered between RM7 to RM10 per square feet (sq ft) in 2015, but added that the rate had declined to an average of RM6.50 sq ft these days.

"In some parts of Damansara, it is about RM4 to RM5 [per sq ft] today," she added.

JLL conducted a study on three market areas, which it classified as the central business district (CBD), fringe and decentralisation.

The CBD comprises of areas in the Golden Triangle and its surroundings; fringe encompasses areas outside the City such as Petaling Jaya and Damansara while decentralisation covers areas away from the fringe market, such as Subang.

"Our findings show that areas that have good access to public transportation will see some demand, therefore, we reckon the construction of the Mass Rapid Transit to bring some good in the second half of the year," Lau said.

Lau also pointed that rentals in KL were comparatively better in the South East Asia and that this was likely to attract some foreign investors, namely business process outsourcing (BPO) firms.

"And with the weak ringgit, some BPOs or price sensitive tenants, will be attracted to come in here," she said.