KUALA LUMPUR: Malayan Banking Bhd (Maybank), which today signed a 21-year tenancy agreement with Permodalan Nasional Bhd (PNB) to lease space in Menara Merdeka 118 here, will move its corporate head office to the world’s second tallest building in the first quarter of 2025 (Q1’25).
Maybank group president and CEO Datuk Khairussaleh Ramli said it will occupy 33 floors in Menara Merdeka 118, which is expected to house some 5,900 employees of the bank in the new building. All existing offices within Menara Maybank in Jalan Tun Perak, its current head office, will relocate to the new building on a staggered basis starting Q1’25.
Khairussaleh said the company considered several options when evaluating a new head office, including refurbishing the 35-year old Menara Maybank, constructing a brand new head office or renting office space from a new building that would meet future operational requirements.
“We looked at the cost-benefit of upgrading Menara Maybank to meet operational and efficiency advantages, and the latest standards of sustainability. However, doing that would incur significant investments, not to mention the maintenance costs and the need to temporarily relocate our offices and employees into various locations within the Klang Valley.
“In addition, there would be various operational risks and business disruption to our customers. Since Maybank is not in the business of property development, we saw it prudent to pursue the tenancy option. We also had to evaluate options for our current head office, Menara Maybank, which we own and would become largely vacant if we moved. After reviewing several building options to rent, we decided on Menara Merdeka 118 as it fulfilled the considerations mentioned,” he said in his speech during the signing ceremony.
Khairussaleh explained that the Kuala Lumpur main branch in Menara Maybank will remain and there will be no impact on customers who have accounts with the branch. Selected Maybank subsidiaries currently based in Dataran Maybank including Maybank Islamic, Maybank Investment Bank and Maybank Asset Management, will also relocate.
However, Maybank’s total occupancy of 650,000 sq ft at Menara Merdeka 118 will be less than its current net lettable area of 1.09 million sq ft at Menara Maybank.
Maybank will pay an initial monthly gross rent of RM10.60 per sq ft (psf) for the first six years, with subsequent adjustments for inflationary costs, which translates into an effective rental rate of RM8.92 psf, which is lower than the gross rent and within the fair market rates of RM8.48 psf and RM8.93 psf as assessed by independent valuers. The net effective rental rate is commonly used as a measure of expected income from a tenant.
Both parties have entered into a tenancy agreement for Menara Merdeka 118 and concurrently a lease agreement on a triple net basis for Menara Maybank. The tenancy agreement is for an initial term of three years and renewal for a further six terms of three years per term, totalling an overall duration of 21 years.
Under the triple net basis agreement, PNB will be the master lessor of Menara Maybank and bear all expenses related to the building including maintenance, insurance and taxes. This lease agreement allows Maybank to realise rental income while deferring the disposal of Menara Maybank to a later date when the real estate market recovers further, allowing it to maximise the value of the building.
PNB will manage Menara Maybank as well as source for new tenants, ensuring the building continues to generate revenue after the relocation of Maybank’s operations. Additionally, the agreement includes an option to sell Menara Maybank should it add value to both parties.
As the anchor tenant of Menara Merdeka 118, Maybank has been offered naming and signage rights over the building by PNB. Khairussaleh said the company has not decided on a name change but acknowledged that it will need to go through the process of seeking approval from the regulatory authorities should it decide to change the building name in the future.
Meanwhile, PNB president and group CEO Ahmad Zulqarnain Onn said the leasing of Menara Maybank is a win-win solution for both parties.
“Maybank is able to transition from an owner-occupied property and relocate to Merdeka 118 while PNB will be asset managing Menara Maybank as part of its domestic core property portfolio, currently totalling 40 assets in Malaysia and 13 assets internationally,” he said.
“Based on the discussions that we are having, including the signing today and also with other tenants, we expect that we are at 73% in terms of occupancy rate for the tower,” he added.
Menara Merdeka 118 is 92–93% constructed and is on track for completion by year end.