Existing Stock			Rents
	'000 sf	QQQ chg		'000 sf	QQQ chg
Golden Triangle	24,295	0.0%	Prime city centre	5.34	3.9%
Central Commercial Area	14,708	0.0%	Secondary city centre	3.82	9.0%
Decentralised Areas	14,006	0.0%
Other Areas in Klang Valley	11,441	0.5%

Improving occupancy rates

The total supply of office space in the Klang Valley has remained unchanged from 2Q2006 at 64.4 mill sf in the absence of new completion. No new supply of office space is expected until 2007.

Despite registering a relatively high overall occupancy rate of 85.94% in the Klang Valley in 3Q2006, the additional new space occupied in the third quarter was only 75,911 sf compared to 582,200 sf in the previous quarter, reflecting a slow office market during this quarter. Occupancy rate in Kuala Lumpur increased only slightly from 86.13% (2Q2006) to 86.30% (3Q2006). In the KL hinterland, the rate increased from 84.41% to 84.52% during the same period. Prime Grade A buildings are enjoying more than 90.00% occupancy rates, which are higher than secondary buildings (81.90%). For example, in the Golden Triangle, vacancy rate for prime buildings is at 4.60% compared to 24.01% for secondary buildings. Some of these older secondary buildings are less than 50% occupied. A number of these buildings are being refurbished to remain competitive in the light of higher expectations from tenants. Outside the city center, prime buildings continued to be preferred properties with occupancy rate recorded at 93.89% compared to secondary buildings which were only 82.19% occupied.

Rental rates have shown an upward trend due to the limited supply of office space, particularly in the city center. Rates for prime buildings increased by 3.9% with an average rate increased from RM5.14 psf pm (2Q2006) to RM5.34 psf pm. The average rate for secondary buildings was at RM3.82 psf pm.

The market is relatively active with a significant number of companies reviewing their space requirements and options. Some of the new leasing activities during the quarter were ABN-Amro (15,000 sf) and British Telecoms (10,000 sf). KAF_Seagroatt & Campbell has relocated to Chulan Tower occupying about 70,000 sf of space.

Given the strength of the projected growth rate of the services sector at 16% in KL, we expect the overall demand for office space for the year to increase accordingly.

Key Leasing Transactions 3Q2006

Company	Buildings	NLA Leased
JW Marriot	Menara Olympia	8,000 sf
Fujitsu	Menara Olympia	7,000 sf
Walton International	Wisma Genting	5,000 sf
British Telecoms	KL Sentral	10,000 sf
KAF_Seagroatt & Campbell	Chulan Tower	70,000 sf
ABN-Amro	Menara Maxis	15,000 sf
BIH Heaters	HP Tower	3,500 sf

Source: DTZ Research Sept 2006

	Existing Stock			Rents
	'000 sf	QQQ chg		'000 sf
Overall Klang Valley	32,988	1.8%	KLC (city centre)	RM18-40
KLC	17,515	1.7%	Suburban(PJ)	RM10-28
Suburban Area	15,472	2.0%

Hypermarkets take the lead

Consumer sentiment, as measured by the CSI recovered in the 2nd Quarter above the threshold 100 level, to 104.2 points after tanking at 90.1 in the 1st Quarter in the face of rising cost of living which had a strong dampening effect on private consumption. Generally, consumer spending remained cautious, not withstanding that the economic performance for the first half was relatively strong at 5.7% but may cool for the rest of the year. Households continued to be worried about inflation especially escalating oil prices, and have delayed major spending plans.

On the demand side, an additional 687,000 sf were absorbed over the quarter in review and this take the average occupancy up to 86.15%, marginally up by 0.53 % point. Notable leases announced include a Metro specialty store at Avenue K of 68,000 sf and another outlet of 115,000 sf at Berjaya Times Square.

The supply side saw the completion of several hypermarkets which includes Tesco Ampang located at Pandan Jaya off the Middle Ring Road 2, Carrefour at Kepong and by local operator, Mydin Mall, USJ bringing the total additional net retail space to some 598,000 sf. Whilst as a trend, hypermarkets are advancing in terms of the outlets, Makro a wholesale, cash and carry operation which has 8 outlets nationwide, announced that their Malaysian operation is up for sale. Having struggled in the past few years as well as its lackluster success in the recent repositioning to cater to small retailers, the company has decided to exit Malaysia.

New malls announced include the biggest Jusco (Aeon) store in Southeast Asia to be located at Bukit Tinggi, Klang with net lettable area of 750,000 sf and Tropicana Mall with net lettable area of 380,000 sf at Damansara Intan, Petaling Jaya. Jusco also opened its second JOne outlet - its supermarket format at Pearl Point, Old Klang Road with net lettable area of 30,000 sf following the success of its first JOne outlet in Damansara Damai.

On the fashion front, Louis Vuitton (LV) launched its new 6,000 sf flagship store in Starhill Gallery, Kuala Lumpur in conjunction with the brand's 21 years of operations in Malaysia. The new store features LV's luxury of tradition and its signature interior concept. FJ Benjamin is expected to open Malaysia's first GAP stores in the next quarter at Lot 10, Kuala Lumpur and One Utama Shopping Centre.

As for capital value, the sale of City Square Shopping Centre is analysed at RM561 psf, compared to neighbouring Plaza Ampang at RM322 psf. Investment interests continue to be strong in this sector, not withstanding the lack of availability of good assets in the market.

Major Residentail Launches in 3Q06

Development	No. Units	Type of Property	Pricing(Range/Average)
10 Mont Kiara	332	Condominium	RM530 psf
Subang Avenue Serviced Suite	280	Serviced Residence	RM330 psf
The Cova	346	Condominium	RM240 psf
The Saffron at Sentul East	467	Condominium	RM240 psf

Source: DTZ Research Sept 2006

Cautious responses to sale launches

Overall sales continued to be generally slow reflecting past 2 quarters trend as developers reported cautious responses to sale launches, not withstanding the strong performance of the economy in the second half of the year which registered at 5.7%. The stable prospect for job and households' finance, the improved consumer sentiment and milder inflation had no significant impact on an otherwise lackluster market. With no significant incentive in this year budget for either buyers, developers or the housing industry, developers may need to brace for more challenges ahead.

Selective projects in the popular locations such as Mont Kiara continued to be well received. In this respect, I-Zen @ Tifani priced at an average of RM450 psf reported sale of 67% since its launch last quarter, whilst The Verve Suites, average RM570 psf, and comprises mainly smaller studio units, reported a sale rate of 70% on its first phase of 204 units. The I-Zen @ Tifani being the first project in town to use two well known personalities as brand ambassadors, for its marketing strategy.

At Bukit Bintang, the Pavilion Residence achieved a strong 45% sale rate on its first tower of 205 units derived from both local and foreign buyers.

Capital value at Mont Kiara has moved marginally by 5.9%, to RM518 psf whilst around KLCC, the average is about RM752 psf, up by 5.3%. In particular, Mont Kiara's pricing appear to be fast catching up with downtown's level with new launches aggressively priced at levels comparable to some similar projects around the KLCC. Rental levels at both these locations are stable at between RM3.00-4.50 psf/m.

Major new launches noted during the quarter include both mid and high end products. The Cova at Kota Damansara offers 346 units of Cova Villas at an average of RM240 psf whilst Subang Jaya saw the launch of the Subang Avenue Serviced Suite at RM330 psf. YTL also launched their 3rd project, The Saffron at Sentul East priced from RM240 psf. At the upper end of the spectrum, The 10 @ Mont Kiara has a strong preview offering very spacious units (minimum 3,700 sf onwards) at RM530 psf onwards. Other projects awaiting launch include The Oval, Platinum Park and a CDL project beside The Regent Hotel at Bukit Bintang.

With interest rate stabilizing and the monetary regime still conducive, it is hoped that the market will take time to consolidate over the balance of the year.

Major Investment Sales in 3Q06

Property, Location	Type	En-block Price (RM mil)	Price psf (RM)
Patimas Technology Park	Office	68	453
Menara Lien Hoe	Office	53	255
Empire Tower	Office	270	465
Crown Princess Hotel	Hotel	240	416,666/room
City Square Shopping Centre	Retail	170	561
The Westin Hotel KL	Hotel	455	1 mil/room
Sheraton Subang	Leisure	140	278,884/room

Source: DTZ Research Sept 2006

Largest landmark transaction recorded, strong interest in hospitality

The third quarter saw a strong increase in the total value of investment transactions with an estimated RM1.45 billion worth of properties sold, up from RM388 million registered in the 2nd Quarter. The biggest deal reported is the City Square Centre (this includes The Empire Tower, Crown Princess Hotel and City Square Shopping Centre) that was sold to Hong Kong based fund, Macquarie Global Property Advisors for a total value of RM680 million. After including Plaza Ampang (RM80 mil), which forms part of the sale, this transaction is probably the largest in the history of the local property market. Aside from the size of the total value, the deal reflected strong confidence in the investment climate in Malaysia over the longer term by foreign institutional funds operating in the region.

Closely following up to this and as a sign of better time for the hospitality market, 2 major hotels were sold in the Klang Valley. The Westin Hotel, which is about 2 year old, was sold for RM455 million, another benchmark pricing for this 445 rooms, 5 star property to Newwood, a Thai company whilst the Sheraton Subang Hotel and Tower was sold to The Far East Consortium for RM140 million. The Westin deal is analysed at RM1 million per room (including 68 serviced apartment units) whilst the Sheraton deal at RM279,000 per room. (Including 149 unfitted rooms).

In a quarter seemly dominated by the hospitality sector, Su- Casa Serviced Apartments which is owned by SuCasa Sdn Bhd (a consortium comprising Tan and Tan Development Bhd, Hicom Properties and Topway Investments Ltd) was sold to Kuala Lumpur City Corporation Bhd for RM53 million. YTL also announced that they would inject the Ritz Carlton Residence into the Starhill REIT in the last quarter of the year.

In the office market, beside Empire Tower, 3 buildings were reported sold. These include Menara Lien Hoe, Menara MRCB at Shah Alam and Patimas HQ at Technology Park Malaysia. The latter 2 are sold on a sale and lease back basis. We also understand that Menara Aik Hua and Wisma Genesis are under offers.

The rising interest environment does not seem to have any effect on investment sentiment to date, and yield level has so far not factored into account the recent increases. With the high liquidity, the only constraint to higher volume seems to be the availability of good assets on the market. The strong flow of foreign fund into Malaysia augers well and reflect foreign confidence in the country's strong macro economic prospect going forward as the 9th Malaysia Plan kick into place next year.

AREA TAXANOMY

STOCK

NEW SUPPLY
Refers to the supply of new properties confirmed i.e. projects with planning approval and there are definite plans to proceed with the development or under construction at the time of reporting. The year for new supply refers to the year in which the projects/units are expected to receive Certificate of Fitness for occupation.

ABSORPTION
Refers to the total number of net take up of accommodation or units in new projects being leased or sold. Resale of units is excluded.

RENTS
Average gross rents are computed based on a basket of properties, inclusive of service charges. Office - typical net floor size adopted are between 2,000 sq ft and 5,000 sq ft.

MARKET PRICES
Market prices are reported on per sq ft (psf) basis on net floor areas. The office and retail market are reflective of en bloc sales evidence (referring to the sale of entire land and building).