E-commerce continues to drive demand for warehouse and logistic space, says Knight Frank Malaysia
22 Jul 2021
The rise of e-commerce amid the Covid-19 pandemic highlights the importance of efficient strategies for both delivery and collection methods, says Knight Frank Malaysia.
The consultancy firm adds that the RM300 million allocation for e-commerce campaigns under the RM15 billion Malaysian Economic and Rakyat Protection Assistance Package (PERMAI) is an opportunity to expand e-commerce activities; which eventually translate to higher demand of logistics/warehousing space within the region, especially in strategically-located centres.
In 1Q2021, the country recorded a total of RM80.6 billion worth of approved investments in the manufacturing, services and primary sectors, 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, said Knight Frank Malaysia.
Knight Frank capital markets executive director Allan Sim said in a press release: “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.”
According to the Malaysian Investment Development Authority (MIDA), the total investments in foreign and domestic investments into the electrical and electronics (E&E) industry doubled in 2019 compared to the previous year.
Sim said: “In the manufacturing space, we particularly see more interest surfacing in the E&E sector driven by the global shortage of semiconductors as well as the 5G network roll-out. “
He added that the E&E sector is amongst the top performers amongst key indices i.e. manufacturing output, export as well as manufacturing sales, etc.
“However, in 2020 there was consolidation in investments due to the uncertainty brought about by the Covid-19 outbreak and imposition of the first Movement Control Order. Having said that, we anticipate significant interests and growth potential in the E&E space moving forward, bolstered by current global demand for sensors, semiconductor, solar, Internet of Things (IoT) products, as well as further investments into artificial intelligence (AI), smart machines and others, of the future.”
The industrial segment in Penang is showing growth as well. Knight Frank Malaysia (Penang branch) executive director Mark Saw said: “Penang, ranked third in the country with a total manufacturing investment of RM14.1 billion in 2020, garnered RM1.08 billion worth of approved manufacturing investments from 40 projects in 1Q2021.”
Saw said: “The industrial sector continues to remain as the State’s economic anchor in promoting high-tech industries, such as electronics & electrical (E&E), machinery and equipment (M&E) and medical technology industry”
He added: “The Penang State government aims to promote its global business services (GBS) and continue expanding its industrial land bank following the encouraging take-up at the Batu Kawan Industrial Park. Penang’s medical and logistics industries are seen to be up and coming — and once the pandemic is brought under some semblance of control, there should be more investment activities returning to Penang.”
Meanwhile, in Johor, there has been a shift of demand in this segment. Knight Frank (Johor branch) director Debbie Choy said: “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 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.”
According to Choy, there were also significant announcements for the agriculture sector in efforts to incorporate more technology into modern farming methods. Choy added 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.”
Knight Frank Malaysia said that strict containment measures to curb the spread of the coronavirus such as travel restrictions 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.
The consultancy firm maintained that 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.
Knight Frank Malaysia research & consultancy executive director Judy Ong said: “As Malaysia grapples with the alarming spike of Covid-19 infections, its growth momentum, which is initially expected to continue into 2H2021 and beyond, will be derailed. The strict containment measures, currently in place, continue to severely disrupt supply chains.”
She added: “The Covid-19 crisis, however, has a silver lining for the logistics industry. With prolonged periods of lockdowns and restrictive movements, there is a structural shift towards omnichannel retailing. The pandemic [has] driven an e-commerce boom; [it] augurs well for the industrial property market due to growing warehouse space requirements to cater to the surge in last-mile delivery-cum- collection.“
Source: The Edge Markets