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Industrial remains an attractive sector


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22 JULY, MALAYSIA – The COVID-19 infections in Malaysia showed no signs of abating despite the national roll-out of vaccines. The spike in positive coronavirus cases has led to the reimposition of MCO 2.0 in January 2021, followed by MCO 3.0 and full lockdown (FMCO) since May 2021). According to Knight Frank Malaysia’s latest publication, the Real Estate Highlights 1st half of 2021 (“REH”), which feature the findings of the property market performance across Klang Valley, Penang, Johor Bahru and Kota Kinabalu show that stakeholders in the industrial property segment are expected to practise more caution in formulating their plans as they navigate through this difficult operating environment.

The robust growth of e-commerce amid the prolonged COVID-19 pandemic magnifies the importance of efficient strategies for both delivery and collection methods. The RM300 million allocation for ecommerce campaigns under the RM15 billion Malaysian Economic and Rakyat Protection Assistance Package (PERMAI) is an opportunity to expand the e-commerce activities; which eventually translate to higher demand of logistics/warehousing space within the region, especially in strategically located centres.

Allan Sim – Executive Director of Capital Markets, Industrial said, “Growth in the logistics sector is supported by more new requirements and space expansion from ecommerce players as well as last-mile logistics service providers. The accelerated shift from traditional retail to online order fulfilment will continue to generate strong demand to propel sustainable growth into the future.

In the manufacturing space, we particularly see more interests surfacing in the electrical and electronics (E&E) sector driven by the global shortage of semiconductors as well as the 5G network roll-out. The E&E sector is amongst the top performers amongst key indices i.e. manufacturing output, export as well as manufacturing sales, etc.

According to the Malaysian Investment Development Authority (MIDA), the total investments in foreign and domestic investments into the E&E industry doubled in 2019 compared to the previous year. Sim added “However, in 2020 there was consolidation in investments due to the uncertainty brought about by the COVID-19 outbreak and imposition of the first movement control order. Having said that, we anticipate significant interests and growth potential in the E&E space moving forward, bolstered by current global demand for sensors, semiconductor, solar, internet of things (IoT) products, as well as further investments into artificial intelligence (AI), smart machines, etc of the future.”

“Mark Saw – Executive Director of Penang Branch, Knight Frank Malaysia stated, Penang, ranked third in the country with a total manufacturing investment of RM14.1 billion in 2020, garnered RM1.08 billion worth of approved manufacturing investments from 40 projects in 1Q2021. The industrial sector continues to remain as the State’ economic anchor in promoting high-tech industries, such as electronics & electrical (E&E), machinery and equipment (M&E) and medical technology industry”

Mark added “Penang State Government aims to promote its global business services (GBS) and to continue expanding its industrial land bank following the encouraging take-up at the Batu Kawan Industrial Park. Penang’s medical and logistics industries are seen to be up and coming – and once the pandemic is brought under some semblance of control, there should be more investment activities returning to Penang.”

Debbie Choy – Johor Branch Director added – “A shift in the need for larger storage and efficient logistic services are seen in the Johor market. This increases the demand for industrial properties where some may consider shifting to smaller shop fronts or moving towards the digital platforms. Manufacturers that will benefit from the surge of demand for their goods during this time are also actively in search of appropriate sites for their expansion.

There were also recent significant announcements for the agriculture sector in efforts to incorporate more technology into modern farming methods. Choy shared “there’s been increased requirement to comply with Environmental and Social Governance (ESG) efforts. Some industrialists and developers have begun to apply their thinking caps to future proof their product and services to be in line with global efforts to promote ESG.”

Strict containment measures to curb the spread of the coronavirus such as travel restriction have resulted in limited new foreign entries to the market. Amid the uncertainties, developers, investors and local prospective buyers, are adopting the wait-and-see approach and conserving cash.

Nonetheless, Malaysia remains an attractive destination for high-value manufacturing and global services in Asia due to its favourable investment environment with the availability of excellent infrastructure, telecommunication services, financial and banking services, supporting industries and skilled workforce among other factors.

In 1Q2021, the country recorded a total of RM80.6 billion worth of approved investments in the manufacturing, services and primary sectors in 1Q2021, a surge of 95.6 per cent from the same period last year (RM41.2 billion).

Judy Ong Executive Director of Research & Consultancy, Knight Frank Malaysia shared – “As Malaysia grapples with the alarming spike of COVID-19 infections, its growth momentum, which is initially expected to continue into 2H2021 and beyond, will be derailed. The strict containment measures, currently in place, continue to severely disrupt supply chains.

The COVID-19 crisis, however, has a silver lining for the logistics industry. With prolonged periods of lockdowns and restrictive movements, there is a structural shift towards omnichannel retailing. The pandemic is driven e-commerce boom augurs well for the industrial property market due to growing warehouse space requirements to cater to the surge in last-mile delivery cum collection.“

Moving forward, there is sustained interest in the logistics industry supported by strong demand for warehouse and distribution facilities.

Disclaimer: The information is provided for general information only. Malaysia Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

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