The industrial sector is steadily expanding, thanks to a higher e-commerce penetration rate
08 Aug 2022
The local industrial property market is still doing well, despite challenges and worries about growing inflation, says Knight Frank Malaysia.
Judy Ong, the company’s senior executive director of research and consultation, said the local industrial sector has seen steady growth in recent years, largely due to a higher e-commerce penetration rate.
This is one of the immediate effects, she added, along with increased warehousing space needs to handle the rise in last-mile delivery and the structural change towards omnichannel shopping.
The need for logistics and warehouse space is increasing as the logistics industry continues to expand as a result of key participants in 3PL and e-commerce expanding their businesses, Ong said.
Knight Frank recently published its Real Estate Highlights for the First Half of 2022 (REH), which includes data on the performance of the real estate markets in the Klang Valley, Penang, Johor Bahru, and Kota Kinabalu.
The Klang Valley’s industrial property market activity saw a rebound, with 2,050 industrial properties valued at RM9.21 billion changing hands in 2021. This represents annual increases in the volume and value of transactions of 20.2 per cent and 23 per cent, respectively.
Allan Sim, executive director of land and industrial solutions at Knight Frank, highlighted that the primary issues facing producers and logistics companies are increased transportation costs, a labour scarcity, and supply chain disruption.
According to him, Malaysia is anticipated to gain from this diversification and reshaping of global supply chain strategy as more international corporations establish new businesses and facilities inside the ASEAN area.
Institutional investors and real estate investment trusts are increasingly vying for Malaysia’s industrial and logistics real estate, Sim said.
This is demonstrated by the influx of new investors, including KIP REIT, which made its first industrial-related purchase of industrial land and buildings in Pulau Indah for RM78 million and Capitaland Malaysia Trust, which made its first industrial purchase of a 5.11-hectare freehold industrial warehouse in Batu Kawan, Penang, for RM80 million.
Sim said that local developers are also engaging in large industrial and warehousing developments, citing Titijaya Land Bhd’s recent RM200 million build-to-suit arrangement of a logistic commercial complex for DHL Properties in Penang and IJM Corp.’s partnership with China Harbour Engineering Company Ltd. (CHEC) for their first industrial and logistics development in Kuantan.
Industrial segment is the silver lining in Penang and Johor’s property market
Knight Frank Penang’s executive director Mark Saw thinks that the industrial sector is the silver lining in Penang’s property market.
He said that this is because the growing e-commerce and logistics industries are spurring demand for logistical infrastructure.
According to the firm’s REH report, the Batu Kawan Industrial Park will continue to be the primary hotspot throughout the ensuing three years.
Penang Development Corp (PDC) also intends to build a new industrial park in Kepala Batas and develop between 100 and 150 acres of industrial land per year in Batu Kawan.
Saw said that in order to draw in more interest, particularly from foreign investors, this industrial park would become intelligent and high-tech with the best infrastructure for 5G internet connectivity.
Meanwhile, Tan Lih Ru, associate director of Knight Frank Johor also highlighted that the logistics sector in Johor is booming.
The Port of Tanjung Pelepas (PTP) has seen an increase in its yearly volume, and its present expansion of the Free Zone is scheduled to be finished in 2023.
“This is just one of many other notable industrial projects developments taking place, keeping the industrial sub-sector the bright spot in the state’s property market,” Tan said.