World’s second-tallest building Merdeka 118 tests Malaysia’s appetite for skyscrapers, property market

It’s “a breakdown of urban design”, said Mustapha.

Kuala Lumpur’s soaring population fuelled more high-rise construction, but demand for homes, in particular, came from ethnic Chinese Malaysians for whom real estate is a favoured store of wealth, said Cha-Ly Koh, founder of property data company UrbanMetry. Decades of rising prices helped cement that idea, leading some to buy multiple homes. Many now sit empty — one in five homes in Malaysia were unoccupied as of 2020, according to census data.

In recent years, prices have largely plateaued and owners unable to sell their apartments are finding themselves with underwater mortgages. And yet, new buildings keep coming up.

“It’s a mystery even to me,” Ferlito said of the continued construction despite the diminishing returns from real estate. 

In the commercial sector — where one-third of office space is empty — there also aren’t enough tenants to fill the supply, said Siva Shanker, CEO of estate agency at property consultancy Rahim & Co. As such, the market mostly consists of companies shuffling between buildings, he added.

In Merdeka 118, PNB will itself occupy a large chunk of the 118 floors. It’s also signed up the country’s biggest lender Malayan Banking Bhd — which counts state-linked funds as some of its largest shareholders — as an anchor tenant. PNB agreed to pay a decade’s worth of maintenance of the bank’s current headquarters, among other costs, as part of the relocation deal. 

PNB said it’s looking for tenants for the remaining 30 per cent of its office space. Merdeka 118 will also house a hotel and an observation deck, while its surroundings include a luxury mall. In a statement, PNB said that “Merdeka 118 is geared towards generating a positive impact on the surrounding communities by enhancing liveability, walkability and supporting local economic activity”.