Industrial Properties Remains as an Attractive Sector

Malaysia remains an attractive destination for high-value manufacturing and global services in Asia due to its favourable investment environment

File image for illustration purpose (here, Forest City Industrialised Building System (IBS) Plant has set a record in the Malaysia Book of Records (MBR) as Malaysia's largest fully automated IBS factory in the country)

Despite the national roll-out of vaccines, COVID-19 infections in Malaysia showed no indications of abating. Due to an increase in positive coronavirus cases, MCO 2.0 was reinstated in January 2021, followed by MCO 3.0 and full lockdown (FMCO) in May 2021.

According to  Knight Frank Malaysia’s latest publication, the Real Estate Highlights first half of 2021 (REH), which features the findings of the property market performance across the country including Johor, shows that stakeholders in the industrial property segment are expected to practise more caution in formulating their plans as they navigate through this difficult operating environment.

Malaysia has allocated RM300 million for e-commerce campaigns under the Malaysian Economic and Rakyat Protection Assistance Package (PERMAI) and the aim is to expand the e-commerce activities, which eventually translate to higher demand of logistics/warehousing space within the region, especially in strategically located centres.

Industrial Properties Remains as an Attractive Sector
Allan Sim, Executive Director of Capital Markets

Allan Sim, Executive Director of Capital Markets, Industrial said, “Growth in the logistics sector is supported by more new requirements and space expansion from e-commerce players as well as last-mile logistics service providers. The accelerated shift from traditional retail to online order fulfilment will continue to generate strong demand to propel sustainable growth into the future.

“In the manufacturing space, we particularly see more interests surfacing in the electrical and electronics (E&E) sector driven by the global shortage of semiconductors as well as the 5G network roll-out. The E&E sector is amongst the top performers amongst key indices i.e. manufacturing output, export as well as manufacturing sales and etc”, added Allan.

According to the Malaysian Investment Development Authority (MIDA), the total investments in foreign and domestic investments into the E&E industry doubled in 2019 compared to the previous year.

Industrial Properties Remains as an Attractive Sector
Debbie Choy, Johor Branch Director

Debbie Choy, Johor Branch Director added, “A shift in the need for larger storage and efficient logistic services are seen in the Johor market. This increases the demand for industrial properties where some may consider shifting to smaller shop fronts or moving towards the digital platforms. Manufacturers that will benefit from the surge of demand for their goods during this time are also actively in search of appropriate sites for their expansion.

There were also recent significant announcements for the agriculture sector in efforts to incorporate more technology into modern farming methods. Choy shared that there’s been an increased requirement to comply with Environmental and Social Governance (ESG) efforts. Some industrialists and developers have begun to apply their thinking caps to future proof their product and services to be in line with global efforts to promote ESG.”

Strict containment measures to curb the spread of the coronavirus such as travel restriction have resulted in limited new foreign entries to the market. Amid the uncertainties, developers, investors and local prospective buyers are adopting the wait-and-see approach and conserving cash.

Nonetheless, Malaysia remains an attractive destination for high-value manufacturing and global services in Asia due to its favourable investment environment with the availability of excellent infrastructure, telecommunication services, financial and banking services, supporting industries and skilled workforce among other factors.

In 1Q 2021, the country recorded a total of RM80.6 billion worth of approved investments in the manufacturing, services and primary sectors in 1Q2021, a surge of 95.6% from the same period last year (RM41.2 billion).

Moving forward, there is sustained interest in the logistics industry supported by strong demand for warehouse and distribution facilities.