Why logistics should be the next big thing in the industrial market

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If we play our cards right, shifting our focus to logistics could get the Malaysian economy running at full steam.

In the late 70s till mid-80s, Malaysia’s economy was doing extremely well where we saw a growth of 12% yearly as compared to now, where the economy is only growing around 4% to 5%. According to Siva Shanker, the Head of Investment at Axis REIT Managers Berhad, one of the reasons why our country was doing so well 40 years ago was because we were opening up a lot of opportunities for the manufacturing sectors. We were making things and exporting them. In fact, at some point, we were the number one exporter in the world for air-conditioner.

Unfortunately, at some point we changed our game plan and started building more retail complexes, high-end offices, shopping malls and condominiums, and everyone forgot this blossoming sector. Hence, in 2017, industrial only saw 2% overall volume of transactions, compared to residential which had 62% of transactions.

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Having a low volume of transactions also means that the competition is low in this industry. Therefore, it makes more sense for developers to focus on this market and bring the industry back and running.

There are two main activities in the industrial market – manufacturing and logistics. To put it in a simple term, manufacturing is basically factories that build goods whereas logistics is warehouses where the goods are being stored.

Are we in for a bad time?

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Unfortunately, we know that the commercial and residential industry is struggling slightly in the last couple of years and it will take a while till it gets better. Speaking at the 27th National Real Estate Convention, Siva Shanker believes that the industrial foothold is quite strong. This is because there are a huge demand in the market for it right now.

The changing face of logistics

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In the recent years, a lot of people are looking at getting a bigger space for their warehouses. Shanker opines that previously people were asking for a space that’s only 50, 000 to 100, 000 square feet. But today, they’re asking for a much larger space, some reaching up to one million square feet. Besides that, customers are also asking for warehouse with higher eaves height so they can stack up more goods. Apart from that, they are also using more sophisticated racking system, stringent safety systems, higher-load bearing floors, more loading bays and dock levellers in order to ensure efficiency in the warehouse.

In order to accommodate such a demand, there are many logistics hubs in Malaysia namely Shah Alam/Port Klang, Port of Tanjung Pelepas, Johor Port and the latest KLIA Aeropolis. KL Aeropolis is a huge piece of land that is said to be changed into a logistic hub in order to take advantage of its close proximity to the airport. If this is build, then it is no surprise that the logistics industry will be in high demand once again. Currently, the shortage of large warehousing space is still prevalent in the market. Therefore, developers should tap on this market before it becomes too competitive.

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Written by Rubaa Shunmuganathan. 

 

 

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