Read about the economic overview, offices, retail, residential, investment and some key statistics on DTZ Property Times Kuala Lumpur.

1. Property Times
Kuala Lumpur Q1 2011
Economy slows but market remains steady
11 April 2011  The Malaysian economy in Q4 2010 expanded at a slower rate of
4.8% year-on-year (YOY) after growing 5.3% in Q3 2010 to end
the year with growth of 7.2%. The slower growth in Q4 2010 was
Contents a result of lower external demand for Malaysian goods and
Executive summary 1
services.
Economic overview 2
Offices 3  Prime office rents moved upwards slightly in Q1 2011 but
Retail 4 continue to be under pressure, with the anticipation of substantial
Residential 5 developments in the supply pipeline (Figure 1).
Investment 6
Key statistics 7
Definitions 8  The retail market continues to be active but the increase in
Contacts 9 inflation could dampen consumer spending. Nevertheless, the
sector remains optimistic with forecast retail sales growth of 11%
Authors in Q1 2011.
Brian Koh  The residential sector saw optimism reflected in higher prices,
Executive Director but also caution due to declining affordability. With prices and
Consulting & Research affordability moving in different directions, the sector may enter
brian_koh@dtz.com.my
into an uncertain patch before settling into a more discernible
Halimah Mohamad trend.
Senior Manager
Consulting & Research  The investment market may be affected by political turmoil in the
halimah_nor@dtz.com.my Middle East on certain proposed joint ventures involving funding
from that region.
Contacts
Chua Chor Hoon Figure 4
Head of SEA Research Average prime office gross rents
chorhoon_chua@dtz.com.sg
RM per sq ft per month
Ong Choon Fah 7
Head of Consulting & Research,
SEA 6
choonfah_ong@dtz.com.sg
5
David Green-Morgan
Head of Asia Pacific Research 4
david.green-morgan@dtz.com 3
Tony McGough 2
Global Head of Forecasting &
Strategy Research 1
tony.mcgough@dtz.com
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Hans Vrensen
Global Head of Research
hans.vrensen@dtz.com
Source: DTZ Research
www.dtz.com 1

2. Economic overview
 Malaysia’s economy registered slower growth of Figure 2
4.8% year-on-year (YOY) in Q4 2010, after 5.3% and
GDP growth and unemployment rate
8.9% growth in Q3 and Q2 2010 respectively (Figure
2). According to Bank Negara Malaysia (BNM), the %
growth in Q4 2010 was driven by expansion in 12
domestic demand with slower growth in external 10
demand. 8
6
 In Q4 2010, most sectors maintained their positive 4
growth with the manufacturing and service sectors 2
continuing to be the drivers, both expanding by 6.2% 0
YOY respectively. The agricultural sector registered a -2 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10
contraction of 4.3% due to a decline in the production -4
of crude oil. The mining sector shrank by 1.3%. -6
-8
 Overall, the full year growth for 2010 is 7.2%, GDP growth (YOY) Unemployment rate
compared to the contraction of 1.7% in 2009. Source: Department of Statistics Malaysia, Bank Negara Malaysia, DTZ Research
 The economy is expected to slow in 2011 to 5-6% in
line with the global trend. The Malaysian Institute of
Economic Research (MIER) has forecasted the
economic growth for 2011 to be 5.2%.
 With the recent reduction in subsidies for petrol and
other essential goods, inflation is likely to increase
this year although the improving strength of the
Ringgit will moderate prices of imported goods. The
inflation rate of Malaysia was last reported at 2.9% in
February 2011.
 Foreign Direct Investment for 2010 has improved
with a total of RM21.4bn compared to RM5.7bn for
the whole of 2009.
 The Overnight Policy Rate (OPR) has remained at
2.75% since August 2010 but liquidity has been
reduced. Bank Negara will continue to pursue an
accommodative monetary policy so as to be
appropriate and consistent with the assessment of
growth and inflation prospects.
 An additional nine Entry Point Projects (EPP) was
implemented in March 2011 under the RM30bn
Economic Transformation Plan (ETP).
 In June, a new financial sector blueprint will enhance
the capacity and capability of the sector to serve the
needs of a high-income economy.
 With the earthquake and tsunami disaster in Japan,
and the current political turmoil in the Middle East,
the Malaysian economy could see greater external
uncertainty in manufacturing exports and tourism.
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3. Offices
 During the quarter, 240,000 sq ft was added to the Figure 3
office stock in Kuala Lumpur with the completion of
Office net absorption and vacancy rate
Hampshire Place.
sq ft %
(000s) 15
 Enquires for office space in KL was buoyant in the 1,000 14
quarter but it is still a tenant’s market. As a result, the 13
overall occupancy rate of office buildings in Kuala 12
500
Lumpur increased marginally from 86.4% in Q4 2010 11
to 86.9% in Q1 2011 (Figure 3). 10
9
0
8
 Average prime office rents, however, increased from
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
7
RM5.97 per sq ft per month in Q4 2010 to RM6.12 6
-500
per sq ft per month in Q1 2011 as some existing 5
prime buildings reported higher occupancies 4
although this may be temporary with more new -1,000 3
supply coming in the later part of the year (Figure 4).
Net absorption (LHS) Vacancy rate (RHS)
 There is approximately 13.24 million sq ft of new Source: DTZ Research
office space in the pipeline between 2011 and 2014,
the majority of which is scheduled for completion in Figure 4
2012 (Figure 5).
Average prime office gross rents
 KL Eco City is expected to be launched for sale in RM per sq ft per month
early Q2 2011 with stratified boutique offices and 7
office towers, bringing around two million sq ft of 6
office space into the market in three to five years’ 5
time.
4
 The sale of strata titled office space seem to be 3
picking up, both in the city centre as well as suburban 2
projects, with strong response to launches and 1
developers continuing to be optimistic. A major
0
prime office, Q Sentral at KL Sentral, was soft 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
launched for sale at an indicative price of RM1,400
per sq ft.
Source: DTZ Research
 An immediate effect noted from the EPP under the oil
and gas sector is tenants in this industry expanding
their office space requirement. Figure 5
Office development pipeline
 The outlook for the sector is likely to remain soft in
the next few years as it will take time to increase
demand with these new initiatives while there is a
2014
substantial amount of new supply coming up, most of
which is of a speculative nature. 2013
2012
2011 sq ft (000s)
0 2000 4000 6000 8000
Prime: GT Prime: CCA
Prime: decentralized area Secondary: GT
Secondary: decentralized area
Source: DTZ Research
www.dtz.com 3

4. Retail
 With consumer sentiment on a high over much of last Table 1
year, retail sales for the whole of 2010 exceeded
initial projections, with growth of 8.4% for the whole Existing retail stock (NLA)
year and 8.5% for Q4 2010. Retailers remain
Q4 2010 QOQ
optimistic that Q1 2011 sales will grow at about 11%
(sq ft) change (%)
with the Lunar New Year falling within this period.
Kuala Lumpur 20,973,519 0
 Occupancy remains at a high and stable level of 87%
Outside Kuala Lumpur 20,662,992 0
whilst no substantial movement was noted for rental
Source: DTZ Research
rates of most malls. However, Sunway Pyramid
Shopping Mall reported a double-digit increase in
rents of 17.1% on lease renewals in the Q4 2010
whilst Subang Parade reported a 2%decline over the Figure 6
same period.
Retail new supply (NLA)
 No new space was added in the quarter with the sq ft
3,500 (000s)
existing stock staying at around 41.64 million for
Klang Valley (Table 1) and the potential supply 3,000
remaining the same as in the previous quarter with 2,500
most them coming in 2011 (Figure 6 & Table 2). 2,000
 Inflation continued to be a concern with the 1,500
Consumer Price Index increasing to 2.4% in 1,000
January, and will have an impact on the real disposal 500
income of households. With a higher global
0
inflationary rate as a phenomenon, the appreciation
2006
2007
2008
2009
2010
2011
2012
2013
2014
of the Ringgit may not be able to mitigate rising the
cost of imports.
Completed supply New supply
 The continued Governmental efforts to control credit Source: DTZ Research
card delinquency and tighten issuance will also
impose a negative impact on retail sales, whilst
Table 2
slower tourist inflows from the Middle East and Japan
given recent events will have an adverse impact in Upcoming retail centres in 2011
the coming months.
Name of development Est NLA (sq ft) Location
 The performance of malls is likely to be mixed going 1 Shamelin 420,000 Cheras, KL
forward, with selective prime malls continuing to out-
perform although at a slower pace than before. The Citta Mall 424,000 Ara Damansara
rest, especially suburban malls, will be subject to Festival Mall 450,000 Setapak
stronger competitive forces fragmenting their market
shares and resulting in flat rental growth. Intermark 200,000 Jalan Ampang
Solaris Mont’
Solaris 2 300,000
Kiara
Suria KLCC
140,000 KLCC
(Extension)
Viva Home 688,000 Jalan Loke Yew
Source: DTZ Research
www.dtz.com 4

5. Residential
 The residential market entered the new year with Figure 7
both optimism as well as caution, with escalating
Rents and capital values of prime condominiums in
prices for new launches but declining affordability, at
Kuala Lumpur
least for the average house buyer. Developers are
generally optimistic with planned new launches. With 700 RM per sq ft RM per sq ft per month 5
prices and affordability moving in different directions, 600
the market may enter into an uncertain patch before 4
500
settling into a more discernible trend.
400 3
 Higher land prices and construction cost escalations 300 2
are major drivers of higher prices supported by the
200
continued ample liquidity and low interest 1
environment. It remains to be seen if the latest 100
revisions on finance margin on third property and a 0 0
reduction in banking liquidity through the increase in
2005
2006
2007
2008
2009
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
statutory reserve will rein in runaway prices.
Capital values (LHS) Rents (RHS)
 With more completions of condominiums in the KLCC Source: DTZ Research
area, the situation is turning into a tenant’s market,
especially for the larger units. There is also ample Table 3
supply of units available in the secondary market with
owners now able to transact freely unlike when the Upcoming high end condominiums in Kuala Lumpur
projects are under construction. A recent survey of in 2011
completed projects around the KLCC area revealed
that occupancy ranged from a low of about 10% to a Project Units
high of 80%, with an average of 56%, an issue that 1 Sentul 284
investors should be wary of.
Clearwater Residences 108
 Capital values are relatively stable at an average of Kiara 3 160
RM603 per sq ft with KLCC properties averaging Kiara 9 192
RM910 per sq ft (Figure 7). The Caper at Sentul, an
old suburb being rejuvenated, was soft launched by Sunway Palazzio (Block A) 80
YTL Land late in March at an average price of Source: DTZ Research
RM600 per sq ft. It set a new benchmark for Sentul
and was reported to have good response. Figure 8
 Amongst the expected completions for first half of Future supply of prime condominiums in Kuala
2011 include 1 Sentul, Clearwater Residences and Lumpur
Kiara 3 (Table 3) and the future supply are mostly units
outside the city centre in 2011 (Figure 8). 5,000
4,500
4,000
 Demand will continue to be relatively selective, with
3,500
strong latent demand building up for more affordable
3,000
properties in the more established suburbs. The 2,500
proposed billion ringgit Mass Rapid Transit (MRT) 2,000
project would hopefully enable sites located further 1,500
off the city centre to benefit by offering affordable 1,000
homes, given their lower land costs. 500
0
2011 2012 Post 2012
City centre Outside city centre
Source: DTZ Research
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6. Investment
 Investment volumes dropped marginally by 2%from development joint ventures for foreign investors
Q4 2010 to RM1.4bn in Q1 2011. Q4 2010 saw a which in the past were relatively scarce, given
major deal of RM651.8m when CapitaMall Asia developers’ access to ample liquidity.
Limited announced the purchase of Queenbay Mall,
Penang from the CP Group (Figure 9). With this  Given the political turmoil in the Middle East, the
acquisition, CapitaLand and its related entities now impact on Malaysia is still uncertain. Some major
control the two major retail centres in Penang, which announced or committed deals may be aborted or
include the Gurney Plaza. delayed, whilst there could be a greater flow of hot
money toward Malaysia as a safe haven. However,
 Reflecting a retail focus in recent months, IGB this event will add more uncertainties, and with the
announced that it will inject The Gardens @ recent earthquake in Japan, add more challenges to
Midvalley into KrisAsset, a majority controlled entity the local economic growth which still depends on
at an indicative price of RM820m or approximately exports to a large extent.
RM998 per sq ft, whilst Pramerica is looking to exit
the market for one of its older retail funds, and  Nevertheless, under the ETP, domestic investment is
inviting offers on its three malls located in Klang, Ipoh expected to drive the projects. Thus implementation
and Seremban. We also noted the purchase of 72 of the EPPs is not expected to be affected at this
strata retail lots within a proposed mixed point in time.
development, One South, for RM105m at Sungei
Besi by South Crest Synergy (Table 4). Figure 9
Total investment sales in Malaysia
 Two office buildings were reported to be sold during
RM (000s)
the quarter, with prices achieved at between RM550-
650 per sq ft. One of them is the proposed Oilcorp 8,000
Amanah Tower, which was sold to Tenaga Nasional 7,000
Berhad (TNB), the national electricity company, for 6,000
RM554 per sq ft. The yield achieved is estimated to 5,000
be in the range of 6.4-7.0%.
4,000
3,000
 The Government Linked Investment Companies
continue to be hungry for domestic real estate assets 2,000
that meet their investment criteria for longer term 1,000
leases and to utilise allocated funds for the real 0
estate sector.
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
 With several major greenfield projects being Source: DTZ Research
implemented in the near future, which include KL
Eco-City, redevelopment of the former Pudu Jail, KL
International Financial Centre (KLIFC), and Sungai
Besi Airport, there will be opportunities for
Table 4
Significant deals
Property Purchaser Vendor Price
The Ritz Garden Hotel, KL Leopard Holdings Bhd GSB Group Bhd RM22m
One South strata lots, KL South Crest Synergy Sdn Bhd Hua Yang Bhd RM105m
Oilcorp Amanah Tower , KL Tenaga Nasional Berhad Magic Coast Sdn Bhd RM233m
The Gardens Mall, KL Krisassets Holding Bhd IGB Corporation Bhd RM820m
Source: DTZ Research
www.dtz.com 6

7. Key statistics
Table 5
Markets
QOQ YOY
Q1 Q2 Q3 Q4 Q1 change change Directional
2010 2010 2010 2010 2011 outlook
(%) (%)
Office
Net absorption (000s sq ft) 118 414 790 426 509 19.0 431.4 ◄►
Occupancy rate (%) 87.2 87.9 87.1 86.4 86.9 0.6 -0.3 ◄►
New supply (000s sq ft) - - 1,437 - 240 N/A N/A ▲
Prime rents (RM per sq ft per
6.02 6.00 5.98 5.97 6.12 2.5 1.7 ◄►
month)
Residential (non-landed resale)
Average capital value of prime
569 552 600 599 603 0.67 5.98 ◄►
condominiums (RM per sq ft)
Source: DTZ Research
Table 6
Leasing transactions
Address Size (sq ft) Tenant Sector
Gardens North, Kuala Lumpur 3,597 MyBiz Solutions Sdn Bhd Office
Menara TM, Kuala Lumpur 25,000 Cargill (Malaysia) Sdn Bhd Office
Symphony House, Petaling Jaya 11,039 Eli Lilly (M) Sdn Bhd Office
Source: DTZ Research
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8. Definitions
Development pipeline
Comprises two elements:
1. Floorspace in the course of development,
defined as buildings being constructed or
comprehensively refurbished.
2. Schemes with the potential to be built in the
future, though having secured planning
permission/development certification.
Net absorption
The change in total occupied floorspace over a specified
period of time, either positive or negative.
New supply
Total floorspace which is ready for occupation either
now or within the next 6 months. Ready for occupation
means practical completion, where either the building
has been issued with an occupancy permit, where
required, or where only fit-out is lacking.
Prelet/pre-commit
A development leased or sold prior to completion.
Prime rent
The highest rent that could be achieved for a typical
building/unit of the highest quality and specification in
the best location to a tenant with a good (i.e. secure)
covenant.
(NB. This is a gross rent, including service charge or tax,
and is based on a standard lease, excluding exceptional
deals for that particular market.)
Stock
Total accommodation in the commercial and public
sectors both occupied and vacant.
Take-up
Floorspace acquired for occupation, including the
following:
1. offices let/sold to an eventual occupier;
2. developments pre-let/sold to an occupier;
3. owner occupier purchase of a freehold or long
leasehold.
(NB. This includes subleases.)
Occupancy rates
The percentage of total net lettable area/units occupied
with available stock.
www.dtz.com 8

9. Contacts
Consulting & Research
Brian Koh +60 (0)3 2161 7228 ext 800 brian_koh@dtz.com.my
Halimah Mohd Nor +60 (0)3 2161 7228 ext 814 halimah_nor@dtz.com.my
Markanah Hj Mat Taib +60 (0)3 2161 7228 ext 813 markanah_taib@dtz.com.my
Global Corporate Services
Chua Wei Lin +60 (0)3 2161 7228 weilin_chua@dtz.com.sg
Yasmine Mohd Zamirdin +60 (0)3 2161 7228 ext 612 yasmine_zamirdin@dtz.com.my
Chintan Mithalwala +60 (0)3 2161 7228 ext 610 chintan_mithalwala@dtz.com.my
Investment
Brian Koh +60 (0)3 2161 7228 ext 800 brian_koh@dtz.com.my
Sr Low Han Hoe +60 (0)3 2161 7228 ext 202 hanhoe_low@dtz.com.my
Peter Chew Lye Sing +60 (0)3 2161 7228 ext 810 peter_chew@dtz.com.my
Tony DeCosta +60 (0)3 2161 7228 ext 811 tony_decosta@dtz.com.my
Property Management
Sr Adzman Shah Mohd Ariffin +60 (0)3 2161 7228 ext 400 adzmanshah@dtz.com.my
Mohd Azhan Che Mat +60 (0)3 2161 7228 ext 412 mohd_azhan@dtz.com.my
Residential
Eddy Wong +60 (0)3 2161 7228 ext 550 eddy_wong@dtz.com.my
Chong Yen Yee +60 (0)3 2161 7228 ext 551 yenyee_chong@dtz.com.my
Alex Loo Chon How +60 (0)3 2161 7228 ext 558 alex_loo@dtz.com.my
Retail
Ungku Suseelawati Ungku Omar +60 (0)3 2161 7228 ext 300 suseela@dtz.com.my
Joseph Cheah +60 (0)3 2161 7228 ext 321 joseph_cheah@dtz.com.my
Susan Yew +60 (0)3 2161 7228 ext 310 susan_yew@dtz.com.my
Valuation
Sr Adzman Shah Mohd Ariffin +60 (0)3 2161 7228 ext 400 adzmanshah@dtz.com.my
Sr Azmi Hj Omar +60 (0)3 2161 7228 ext 200 azmi_omar@dtz.com.my
Hanafi Abd Rahman +60 (0)3 2161 7227 ext 204 hanafi_rahman@dtz.com.my
www.dtz.com 9

10. Disclaimer
This report should not be relied upon as a basis for entering into transactions without
seeking specific, qualified, professional advice. Whilst facts have been rigorously
checked, DTZ can take no responsibility for any damage or loss suffered as a result of
any inadvertent inaccuracy within this report. Information contained herein should not,
in whole or part, be published, reproduced or referred to without prior approval. Any
such reproduction should be credited to DTZ.
© DTZ April 2011
www.dtz.com