Johor Bahru Real Estate Highlights 1H2017

Johor Bahru Real Estate Highlights 1H2017

Market indications
According to 1Q2017 data from the National Property Information Centre (NAPIC), the volume and value of transactions for Johor fell by 4.6% and 24.2% respectively, when compared to 1Q2016.

There was a 6.8% decline in the transaction volume for the residential sub-sector while the industrial sub- sector, bucked the trend by posting a sharp increase of 75.5% (1Q2016 to 1Q2017) in transaction value.

Market highlights
Following earlier reports of Saudi Aramco’s withdrawal of interest in the RAPID project in Pengerang, all doubts were put to rest when it signed a mega deal worth RM31.1 billion with Petronas in February.

In March, news of China’s bid to curb capital flight broke and Forest City’s rapid growth hit a speed bump. Some China-based buyers suddenly found their investments untenable. The master developer, Country Garden Holdings, has since widen its target market to include global investors.

As of May 2017, Country Garden has already handed over 132 residential units under Kylin Apartments to the respective owners from various countries.

Despite being impacted by the capital control policy, the developer with strong financial and construction background, has commenced work on the second phase which includes three international standard 18-hole golf courses, luxury hotels and low-density residential buildings.

Jade Palace, another Chinese development by Greenland Group, has also been affected with its construction progress slowing as the developer reviews the project to adapt to the challenging market condition.

Residential
The residential sector continues to remain dominant in 1Q2017, accounting for 63.1% of the total transactions in Johor, although the transaction volume was 6.8% lower y-o-y.

The most active district is Johor Bahru with 49.5% share in transaction volume, followed by districts of Batu Pahat and Kluang with 10.0% and 8.6% share respectively. In terms of property type, terraced houses proved to be most popular, accounting for 61% of total residential transactions in the Johor Bahru.
Spurred by activities in the PIPC and RAPID projects, two residential developments have been launched in the surrounding area.

Taman Sri Penawar by MB Group is a 470-acre township development with an estimated gross development value (GDV) of RM1.9 billion. Located in Bandar Penawar, Phase 1 of the development, offering landed residential units and shophouses has been well received.

The other project, Bukit Pelali @ Pengerang, is a joint-venture (JV) between Astaka Padu Sdn Bhd and Saling Syabas Sdn Bhd. This 363-acre mixed use township development, with estimated GDV of RM2.3 billion, features landed and high-rise residential units as well as commercial and educational facilities.

In March, Country Garden Holdings Co Ltd, together with Damansara Realty, launched their JV project in Tampoi. Spanning across 53 acres, Central Park with GDV estimated at RM4.6 billion, offers affordable homes targeted at local home-buyers. The first phase of the project is expected to complete by 2020.

In January, Haute Property Sdn Bhd, a JV between BRDB Developments Sdn Bhd and UEM Sunrise Bhd, handed over completed units for Phase 1 of Emerald Bay. The 111-acre freehold project in Puteri Harbour has a GDV of RM4 billion and is being developed in 12 phases over a period of about eight years. The units sized between 1,916 sq ft and 8,331 sq ft are priced from RM3.1 million to RM10.5 million each.

Retail
As of 1Q2017, total retail space in Johor stood at 18.97 million sq ft, a 3.5% increase y-o-y (1Q2016: 18.33 million sq ft). Two-third (65.5%) of the retail stock comes from Johor Bahru. Overall occupancy dipped marginally to record at 75.6% in 1Q2017 (1Q2016: 75.9%). SKS Mall by SKS Group commenced operations in March. Located in Desaru, Bandar Penawar, the 2-storey shopping mall on a 6.16-acre site has a total built-up area of about 130,680 sq ft. The retail lots sized from 236 sq ft to 1,921 sq ft are currently about 80% occupied with average rentals ranging from RM5.00 to RM9.00 per sq ft per month depending on location, sizing and other factors.

2H2017 will see the opening of 3 new retail malls in Johor Bahru which are the AEON Kempas, Paradigm Mall and IKEA. Paradigm mall is expected to open its doors in November and is set to be the largest regional mall in Johor with an estimated 1.3million sq ft of net lettable space. IKEA will be opening its first Malaysian outlet outside of Selangor around December. Located next to the bustling Aeon Tebrau City, it is a highly anticipated development and is likely to attract large crowds upon opening.

Office
The total supply of purpose built office space in Johor was recorded at about 12.22 million sq ft as of 1Q2017, circa 4.7% increase y-o-y. The bulk of supply totalling circa 9.45 million sq ft is located in Johor Bahru district, followed by Batu Pahat with 0.89 million sq ft supply. The supply of office space is set to increase over the next few years as on-going developments in Johor Bahru City Centre and Medini move closer to completion.

Menara JLand by Johor Land Berhad is set in a prime city centre location.The Grade A office development with GBI Gold certification and built to MSC specifications, represents a new generation of office space catering to discerning tenants in the Johor Bahru market. Standing at 37-storey, the office tower with about 262,592 sq ft NLA comes with an observation deck and cafe at the roof/ top level. It is slated for completion by December 2017.

Industry
For 1Q2017, the industrial sector in Johor shows different trend where the volume of transactions declined (1.8%) whereas the value of transactions increase significantly about 75.5% compared to similar period in 1Q2016. In terms of volume of transactions, District of Johor Bahru (53.6%) and Kulaijaya (14.3%) are leading among other districts while for value of transactions, District of Johor Bahru recorded 53.4% from the total value, followed by Kulaijaya (18.7%).

BMW Group has launched its new regional parts and distribution centre. The RM130 million facility on a 72-hectare land is located within the Free Trade Zone of Port Tanjung Pelepas (PTP) in Senai and provides support to 23 countries in the region including Malaysia, Singapore, Thailand and Indonesia.

Country Garden Pacific View Sdn Bhd is set to build a RM2.6 billion Industrialised Building System (IBS) factory on a 109.5-hectare land in Forest City. The factory, planned to have a total of 12 lines, with three currently in operation, will become the world largest IBS facility.

Outlook
The Johor property market has been lacklustre since the beginning of the year especially with China’s capital controls on outflow of funds to overseas investments.

China developers have been investing heavily in massive residential projects, namely in the Danga Bay area, along the coastal areas of the Straits of Johor and the 4–island Forest City project over the past five years. Potential buyers are mainly from mainland Chinese whilst locals have generally been selective on these projects especially with alternative choices from local developers. Interest in high-rise residential properties has somewhat slowed down with the financial institutions imposing strict lending policies on these projects.

Local developers are bracing for an extended quiet period as potential investors / buyers are now spoilt for choice with numerous on-going projects giving generous incentives and rebates. Nevertheless, we noted that the secondary market for landed properties below RM600,000 per unit are still in demand.

On the office sector, new office buildings are being constructed in the city fringes and also in Iskandar Puteri especially Medini being the hotspot. They are expected to be completed in the next two to three years and will add to the existing office space in the city centre. Overall office rentals have generally improved amid steadily.

However, we note that several new Grade A offices with Green Certification and MSC status have already set new benchmark with asking rentals above RM4.50 per sq ft per month.

The retail sector is experiencing a rapid growth with at least three new malls expected to open its doors by end of the year. Aeon Corporation (M) Bhd is planning to expand in Johor with new sites in the pipeline. Most of its existing malls are doing extremely well with large crowds during weekends and festive seasons.

The trend is expected to continue into the second half of the year for most of the existing malls in Johor Bahru, especially those located in the suburban areas and city fringes.

The industry sector is also entering a challenging period with many completed schemes experiencing difficulty in attracting purchasers and tenants, especially for the terraced and semidetached factories. Asking rentals of these factories have been competitive and generally declining with anticipation of an impending slowdown in the sector. Despite the gloom, there has been an increase in inquiries for industrial lands, large warehouses, logistics hubs and distribution centres in areas such as Pengerang, the PTP and Senai.

In conclusion, with the exception of the retail sector, all sectors are entering a challenging phase with existing stocks to clear and new space to be taken up. Prices and rentals are not expected to hold up and likely to take a dip to fill up the vacancies.

On a brighter note, developments in Pengerang are expected to continue as lands are being acquired for expansion of the oil and gas refineries and processing facilities. Recent news of big investments coming into the RAPID project has turned the area into a bustling hub. Road infrastructure is currently being upgraded and will only serve to bring in more impetus to the region. Demand for the limited housing currently available has made prices there match other districts closer to Johor Bahru.

 

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