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Klang Valley warehouse rental rates remain attractive: Knight Frank

Klang Valley warehouse rental rates remain attractive: Knight Frank

24 Sep 2020

Klang Valley remains attractive in terms of warehouse rental competitiveness among neighbouring key urban areas in the region, said Knight Frank.

Knight Frank Malaysia capital markets executive director Allan Sim said this was due to integrated ecosystem of accessible skilled labour, talent and investor-friendly policies with favourable tax structures and attractive government incentives.

“These help to put Malaysia at a competitive advantage among its neighbours in attracting multinational businesses that are diversifying their global supply chain and manufacturing operations to the region,” he said in a statement today.

The property consultancy has today released its Asia-Pacific Warehouse Review (report) which tracked prime warehouse rents across 17 key cities.

Knight Frank said rents across the cities had registered an average change of -0.02 per cent half-on-half despite Covid-19, while expecting average rental growth between 3.0 per cent and 5.0 per cent by this year-end.

Sim said various incentives unveiled under the RM35 billion short-term Economic Recovery Plan (Penjana) would help encourage more foreign direct investment (FDIs) flows.

“There is a generous tax holiday period of up to 15 years for foreign companies making new investments in the manufacturing sector with capital investments of RM500 million and above.

“This coupled with the fast track approval mechanism for manufacturing licences and tax incentives with the establishment of Project Acceleration and Coordination (PACU) in the Malaysian Investment Development Authority (MIDA), will help to raise the country’s attractiveness in the eyes of foreign investors,” he said.

Sim said with these timely incentives and competitive real estate and labour costs, Malaysia would be positioned as one of the main beneficiaries among the Asean counterparts, in capturing the shoring of manufacturing and supply chain operations amid the on-going restructuring of global supply chains.

“We will also likely to witness a positive spill-over effect in other segments of the industrial property market predominantly in larger purpose-built factories/large tracts of industrial lands, with the potential entry, relocation of new global industrial players.”

Sim said multinational corporations (MNCs) had been looking to diversify their supply chains out of China over the past few years due to growing trade tensions between the US and China as well as rising labour cost in China.

“More recently, the unprecedented disruptions arising from the Covid-19 pandemic, further highlighted the risk of being over-reliant in managing and operating supply chain out of a single country – China,” he said.

For many MNCs, he said the pandemic had become the deciding factor to adopt the “China plus One” approach to supply chain management – by diversifying portions of the supply chain to other regional countries while maintaining higher value manufacturing operations in China with adoption of digital transformation and automation.

“Asean countries are the immediate beneficiaries of this supply chain redesign,” Sim added

Meanwhile, the report highlighted that market conditions for 16 of the 17 cities tracked were expected to remain stable or improve over the next 12 months.

The positive outlook for growth in the second half of 2020 would be underpinned by higher space appetite from e-commerce players and essential commodities.

Knight Frank head of occupier services and commercial agency for Asia Pacific Tim Armstrong said industrial markets remained resilient due to robust demand from the e-commerce and essential goods sectors, as well as additional requirements for inventory storage to mitigate supply chain disconnects.

Source: NST