E-commerce boosting demand for industrial units

Net businesses are moving out from their previously smaller premise to a larger storage area to handle larger stocks

by ASILA JALIL/ pic by AFP

RISING online trade and the emergence of more e-commerce merchants are pushing the demand for warehouses as netpreneurs seek more storage to cope with rising sales and business expansion.

E-commerce sales have shot up in recent years as consumers abandon the traditional brick-and-mortar shops and jump on the Internet bandwagon. Traders are capitalising on the buyers’ unending thirst to buy online, purchasing everything from baby diapers and milk powders to clothing and other basic necessities.

More e-commerce upstarts are also sprucing. To cope with the rising demands, these new net businesses are moving out from their previously smaller premise or their home to a larger storage area to handle larger stocks and process more orders.

The e-commerce phenomenon has helped provide some respite to the reeling property industry, especially commercial properties.

Carey Real Estate Sdn Bhd MD Nixon Paul said while office rental rates in Petaling Jaya (PJ) dropped and property values slumped in between January and October, there were bright spots for industrial properties.

He said industrial buildings in Shah Alam have appreciated in value due to a strong demand for such property.

“Right now, because of e-commerce, demand for warehouses is much stronger,” Paul told The Malaysian Reserve.

National Property Information Centre’s data for the first six months of 2019 showed that overhang for industrial units dropped to 1,047 units worth RM1.65 billion, or 11.5% , compared to 1,183 units valued at RM1.98 billion recorded during the same period a year ago.

Industrial units were the only sector that registered a drop in property overhang during the first two quarters of the year.

Figures for the January through June 2019 period showed overhang in residential units rose by 1.5%, shops added 13.9%, small office and home office (SOHO) increased 24.3% and serviced apartments jumped 59.9%.

The total value of all unsold properties in the country for the above-mentioned period was a stunning RM41.72 billion.

Residential and serviced apartments were the largest contributor to the glut, accounting for RM19.76 billion and RM14.57 billion in total value respectively.

The total unsold properties in the first six months of 2018 was RM35.75 billion, indicating the value of unsold properties continued to rise in the January-June period.

Transactions involving industrial units rose to 3,137 units in the first half of 2019 (1H19), a 24.8% increase compared to 2,514 units in 1H18.

However, commercial properties have not seen a major shift.

Paul said office rental rates in Kuala Lumpur (KL) have not decreased significantly, but a slight drop has been seen in PJ for the first 10 months of this year.

“I can say there has been a decrease of at least 5% for commercial properties in PJ since January this year.

“Whereas for KL, it is hard to make a reference. Actually, you can’t generalise it but in prime locations, they have not dropped,” he said.

He quoted the differences in rental rates between commercial properties in Jalan Ampang and those near KL Convention Centre.

Based on property listings on the Internet, monthly rental for offices in KL ranges from RM1,800 for a 700 sq ft SOHO unit to RM65,000 for a 13,000 sq ft Grade A office.

Knight Frank Research and Consultancy’s Office Market for the second quarter of 2019 (2Q19) stated that there were marginal improvements on the average achievable rental rate and occupancy of office space in KL-fringed area.

The areas were Damansara Heights, KL Sentral, Taman Tun Dr Ismail, Mont Kiara, Dutamas, Mid Valley City, KL Eco City, Bangsar South, Kerinchi, Pantai and Bangsar.

It said rental rates in KL city, however, continues to be under pressure as landlords compete to fill up their office space amid rapid increase of new supply.

“The tenant-led office market is expected to remain challenging in the short to medium term due to the growing pipeline of office space and slower absorption.

“In KL city, newly completed buildings with no significant committed tenancies will continue to exert pressure on the overall occupancy and rental levels. The outlook for the KL city office market remains cloudy as there is no immediate catalyst to boost demand for the escalating office supply.

“On the fringes of KL and in Selangor, however, the office markets are expected to remain resilient with both occupancy and rental levels holding steady. The expanding rail network in the Klang Valley continues to drive demand for office space in these decentralised locations,” it said in the report.

The report showed that rental rates for Grade A offices located in Pantai/ Bangsar saw a 0.3% decrease from last quarter, rates in Damansara Heights and Mid Valley City/KL Eco City remained unchanged, while KL Sentral, Taman Tun Dr Ismail/Mont Kiara/Dutamas and Bangsar South/ Kerinchi registered increases of 1%, 0.5% and 1.5% respectively.

The report also stated that rates for Prime A+ offices at the new central business district (CBD) remained unchanged since the last quarter, while Grade A offices at the new CBD and old CBD have decreased 1% and 0.7% respectively.

It added that the growing number of small and medium enterprises has led to a rise in demand for co-working space.

“This new office segment is here to stay as the current workforce becomes more mobile and occupiers seek for flexibility in business scaling.

“Securing a co-working operator as a tenant offers landlords the flexibility to cater for existing tenants’ changing needs, accommodating leasing requirements as companies grow, downsize or require flexible expansion for short-term projects,” said the report.