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Prime industrial assets in Klang on the radar of developers, manufacturers, and investors

Prime industrial assets in Klang on the radar of developers, manufacturers, and investors

16 Feb 2021

Prime industrial asset values are expected to rise over the near term, particularly in well-planned secondary industrial locations such as Klang in Selangor.

Knight Frank Malaysia deputy managing director Keith Ooi said Klang is benefiting due to the rapid growth and spill-over demand for prime grade industrial space from neighbouring Shah Alam, where land and property prices are predominantly higher compared to secondary industrial locations.

“With the low-interest-rate environment, yields are expected to remain at low levels. Typically, prime grade industrial assets with strong tenant covenants coupled with good accessibility will better weather future headwinds,” he said.

Kight Frank Malaysia deputy managing director Keith Ooi said Klang is benefiting due to the rapid growth and spill-over demand for prime grade industrial space from neighbouring Shah Alam. Courtesy image

Ooi said the local industrial market has seen steady growth in recent years largely due to a higher e-commerce penetration rate resulting in additional warehousing space requirements to meet the surge in last-mile delivery as well as the structural shift towards omnichannel retailing.

He said the firm anticipates the momentum gained this past year to continue into 2021 as the demand remains resilient despite challenging economic conditions.

The Covid-19 pandemic continues to hurt the already battered retail sector but the e-commerce and industrial sectors are making headwinds.

Many business-to-consumer (B2C) companies were forced to adapt quickly from meeting customers face-to-face to selling their goods via digital platforms as lockdowns and movement restrictions were implemented nationwide. This prompted a huge shift to online retail activity.

Knight Frank Malaysia recently launched its New Frontiers – Regions of Opportunities: Infrastructure Impact on Industrial and ECommerce and Supply Chain Evolution’s Impact on Industrial real estate. The report highlights the opportunities for industrial real estate in the Asia Pacific.

The firm’s executive director of capital markets, Allan Sim said online retail activity will remain permanent going forward and result in higher online retail sales growth and penetration across the region, regardless of market maturity.

Sim said the pandemic has accelerated the adoption of online retailing across selected key markets in Asia-Pacific, with the average online penetration growth estimated at 14 per cent in 2020.

He said Malaysia’s online retail growth of 17 per cent during the year, the third-highest among the countries reviewed only translates to a country online penetration of five per cent, hence, there is much potential for further growth.

According to him, the firm has observed notable multi-national companies (MNCs) choosing Malaysia as the location for their regional distribution centres (RDC) in the likes of IKEA Asean RDC, Zalora Regional E-Fulfilment Hub, Lazada E-commerce RDC, Nestle DC, BMW Regional Parts DC, VW Regional Aftersales & Parts DC, Bosch RDC and Broadcom Global DC.

Sim said well-developed infrastructure like road and rail networks, port facility, the readiness of utility (water, electricity, internet connection) is important for e-commerce activities.

Malaysia tops the ASEAN region with c.US$250 million spent on transport infrastructure investments per million capita over the past two decades. One key driver behind Malaysia’s lead is the East Coast Rail Link (ECRL) project, which will connect the main port of Klang on the Straits of Melaka to Kota Bharu, Kelantan.

Sim said Klang is on the radar of many developers, manufacturers, and investors as it is the closest to Port Klang, the largest port in the country that is a platform for the supply chain.

According to Knight Frank Malaysia’s Real Estate Highlights 2H2020, during the review period, Majlis Perbandaran Klang received a surge in applications for development planning of industrial projects.

Circa 38.9 per cent of the applications were for new standalone factories on pockets of land, followed by 29.9 per cent of applications for legalisation of unlicensed factories under Program Pemutihan, 26 per cent for extension or amendment to existing premises, and the remaining 5.2 per cent for new built-to-sell factories.

Johor has also benefited from the rapid growth of e-commerce. Johor Port has announced a breakthrough of over one million twenty-foot equivalent units (TEUs) for the year 2020 and remains optimistic of its future prospects.

Knight Frank Johor director Debbie Choy said Johor seems to be the choice of automakers in housing their RDC.

BMW has set up their RDC on over 58 acres of land in the Free Industrial Zone of Senai International Airport while Volkswagen has set up 538,196 sq ft facilities in the Port of Tanjung Pelepas.

The Penang industrial property market saw active activities compared to others last year.

Penang remains on track in attracting investment from both local and foreign companies. The setting up of US-based Dexcom Inc and Ultra Clean Holdings Inc (UCT)’s first facilities in Penang is proof that the state has a strong industrial eco-system.

Knight Frank Penang executive director Mark Saw said: “We are excited to see the North Butterworth Container Terminal (NBCT) being gazetted as a free trade zone starting February 2021. Such move will elevate Penang from being the manufacturing base for electrical & electronics industry as the NBCT will be able to cater to warehousing and logistics needs of local and global players.”

Source: NST