Malaysia among four prime offshore locations in Asia-Pacific: Knight Frank study - MIDA | Malaysian Investment Development Authority
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Malaysia among four prime offshore locations in Asia-Pacific: Knight Frank study

Malaysia among four prime offshore locations in Asia-Pacific: Knight Frank study

29 Mar 2024

Malaysia stands as one of the top four countries identified as prime offshore locations in the Asia-Pacific region, according to a study conducted by Knight Frank.

The research indicates a significant expansion in the Asia-Pacific outsourcing market, with Malaysia, India, the Philippines, and Vietnam recognised as established players in the global offshore landscape.

Malaysia has consistently been ranked as the third-best global outsourcing location since 2014. The study further highlighted Malaysia’s substantial contribution, with an estimated share of over eight per cent in the Asia-Pacific offshoring market.

The report indicated that Penang is emerging to be a major offshoring hub that has built up offices catering to these facilities in Bayan Lepas. This is in line with the state government’s plans to drive the economy by making Penang a prime investment destination for global business services activities, research and development, and technology hubs.

Prime office rent in Penang is about 25 per cent lower than those in the country’s capital, it noted.

“Companies today face a multitude of challenges, including cost management, sustainability, talent retention, and attraction. At a time when companies worldwide are looking to increase performance, efficiency, and innovation while also prioritising cost control, Asia-Pacific offers considerably lower operating costs, at nearly 70 per cent less than the United States, based on Knight Frank research. 

  “For every square foot of office space, occupiers can expect to save on average US$70.86 in the four cities compared with mature markets. This translates to a staggering 54 per cent cutback in occupancy costs annually,” said Knight Frank global head of occupier strategy and solutions Tim Armstrong.

He said that globally, the office sector is going through a generational shift, with three distinct flights to quality taking place: a flight to sustainable buildings, a flight to amenity-rich offices, and a flight to offices that can provide greater flexibility.

“With the decline in confidence in the office sector, most pronounced in the US, occupiers are turning to the Asia-Pacific. High-quality premium office space in city centres and ESG-compliant buildings remain highly sought after by occupiers in this region as they prioritise 2030 net-zero targets. 

  “Moreover, the highly educated, versatile, and multilingual talent pool in the region’s developing markets is well-equipped to deliver high-quality customer service, positioning them ahead of the curve,” he added. 

Knight Frank Asia Pacific research head Christine Li said cost savings factors are expected to encourage offshoring activities, as evident in India, whereby the country’s leasing transactions involving the Global Compatibility Centre’s proportion rose by 10 per cent, accounting for 35 per cent of the total market share.

  “This trend was similarly observed in the other three key markets, the Philippines, Malaysia, and Vietnam, where offshoring is playing an increasingly significant role in driving demand for office spaces,” said Li.

  She added that occupiers are still cost-conscious due to the challenging macro environment. The silver lining is that corporate occupiers continue to prioritise offshoring functions, fuelling headcount growth in regions that offer growth and innovation at a lower cost while maintaining efficiency in pricier locations. 

  “As such, occupiers concentrate on boosting office demand in these strategic locations while reducing real estate needs elsewhere. 

  “This strategic resource allocation helps mitigate rental declines in markets such as Vietnam and the Philippines, while rents have even strengthened in Malaysia and India despite higher vacancies,” she said. 

She said that with higher demand, rental prices in Malaysia may increase for prime office markets as the flight-to-quality trend grows. 

Source: NST