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More demand for build-to-suit industrial products

More demand for build-to-suit industrial products

14 Jul 2020

Knight Frank Malaysia executive director of capital markets Allan Sim foresees more developers to respond fluidly to current market demand by securing interest of manufacturers/operators to engage in larger build-to-suit industrial products, rather than speculative builds of smaller offerings.

“This strategy will bode well with current market sentiment and trend, as we have been receiving more enquiries from industrialists who are keen to embark on such arrangements, largely spurred by attractive tax incentives for overseas manufacturers under the government’s recently-announced short-term Economic Recovery Plan (Penjana),” he said in a statement in conjunction with the launch of Knight Frank Malaysia’s Real Estate Highlights for 1H2020.

The report highlights that developers are unlikely to embark on large-scale industrial park developments in the short term, due to lower demand for industrial property products.

However, it added that smaller-scale standalone developments, as well as upgrading or redevelopment of existing buildings in established, matured industrial parks with good accessibility and connectivity, where land is scarce, will take centre stage.

Manufacturers or owner-occupiers in the interim could potentially be looking into divesting or liquidating their assets to improve their cashflow, the report said. 

Sim views the outlook for Malaysia’s industrial property segment as favourable. “We expect to see more active enquiries led by manufacturers looking to take advantage of the tax incentives, as well as international e-commerce operators riding on the surge of demand for their services amid consumers’ shift towards digital channels and online shopping. We also foresee more international e-commerce operators considering Malaysia as an important regional distribution hub within their network,” he said.

In the report, Knight Frank Malaysia said that Penjana will help cushion the impact of Covid-19 by encouraging more foreign direct investments. However, it added that the yet-to-be-launched New Industrial Master Plan, deemed to be the continuation of the Third Industrial Master Plan, will provide a more holistic approach towards industrial development and will set the direction of the country’s industrial sector for the next decade.

Meanwhile, rental rates of industrial space in prime sub-markets, namely Shah Alam, Subang, Petaling Jaya, Kuala Lumpur and Klang, are anticipated to remain resilient for the remainder of the year.

In general, monthly asking rents in the Klang Valley industrial market ranges between RM1.80 psf and RM2.50 psf, depending on location, building specifications and other factors, according to the report.

In terms of transactional activity, the real estate consultancy expects those that were delayed during the MCO to pick up during the second half of the year, provided the Covid-19 pandemic remains under control or subsides.

Source: The Edge Markets

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