by AUFA MARDHIAH / pic source: titijaya.com.my
INDEPENDENT global property consultancy, Knight Frank LLP, stated in its Real Estate Highlights first half of 2022 (1H22) that the industrial real estate sector continues to grow compared to the retail sector — across property market performance in the Klang Valley; Penang; Johor Baru, Johor; and Kota Kinabalu in Sabah.
Due to the higher e-commerce penetration rates, the industrial sector has shown steady growth in the past years. This resulted in the growing need for warehouse space to meet the surge in long-distance shipping, as well as the structural shift towards omnichannel retailing.
Knight Frank Malaysia research and consultancy senior ED Judy Ong said: “The industrial property sector in the Klang Valley saw a rebound in market activity with 2,050 industrial properties worth RM9.21 billion changing hands in 2021 — reflecting annual increments of 20.2% and 23% in transacted volume and value respectively.”
Meanwhile, Knight Frank Malaysia land and industrial solutions ED Allan Sim stated the main concerns among manufacturers and logistics players include rising transportation costs, shortage of labour and disruption in the supply chain.
“With more multinational companies setting up new businesses and facilities within the Asean region, Malaysia is expected to benefit from this diversification and reshaping of global supply chain strategies,” he said.
Sim also highlighted that the increase in institutional investors and real estate investment is backed by the entry of new investors — KIP REIT Management Sdn Bhd’s first industrial-related acquisition consisting of a mixture of industrial facilities and industrial land in Pulau Indah, Klang, Selangor, amounting to RM78 million and CapitaLand Malaysia REIT Management Sdn Bhd’s first industrial purchase of a 5.11ha freehold industrial warehouse for RM80 million in Batu Kawan, Penang.
“We predicted that developers will be venturing into large industrial and warehousing developments — such as Titijaya Land Bhd with its recent RM200 million build-to-suit arrangement of a logistic commercial complex for DHL Properties (M) Sdn Bhd in Penang and IJM Corp partnering China Harbour Engineering Co Ltd for their first industrial and logistics development in Kuantan, Pahang,” he further added.
On the same note, Knight Frank Penang ED Mark Saw believed that the industrial segment is the silver lining in Penang’s property market as there is encouraging demand for logistics facilities to serve the expanding e-commerce and logistics sector.
“Batu Kawan Industrial Park will continue to be the main hotspot over the next three years and will become a smart and high-tech industrial park with the best infrastructure for 5G Internet access, in order to attract more interest, especially from foreign investors.
“Furthermore, in addition to the new development of the industrial park in Kepala Batas, Penang Development Corp plans to develop between 100 and 150 acres (60.7ha) of industrial land annually in Batu Kawan,” he added.
Knight Frank Johor associate director Tan Lih Ru also highlighted that the logistics sector in Johor is thriving, following the growth of Tanjung Pelepas Port in its annual volume and the expansion of the current Free Zone expected to be completed in 2023.
“This is just one of many other important industrial projects underway, keeping the industrial subsector a bright spot in the state’s real estate market,” she said.
As against the retail sector, she stated that the cumulative supply of retail space in Johor Baru for the first quarter of 2022 (1Q22) was at 20.4 million sq ft with an overall occupancy rate of 71.6%.
“The reopening of the country’s border with Singapore is positive for the gradual recovery of tourism and retail-related markets. This will lead to a high number of visitors into Johor daily via the Singapore-Malaysia Causeway, as well as via the Second Link Lever,” she further added.
Moreover, the resumption of all economic activity signals better prospects — in terms of better job opportunities and an increase in consumer disposable income.
The unprecedented and unpredictable lockdown period has also driven consumer spending due to pent-up demand. The sector is expected to grow following both the reopening of the economy and international borders, and the high vaccination rates in the country.
Knight Frank Malaysia group deputy MD Keith Ooi said the positive index in the review quarter was driven by consumers’ optimism for better income and employment opportunities.
“The Malaysian Institute of Economic Research Consumer Sentiments Index improved 108.9 points in 1Q22, surpassing the 100-point optimism threshold.
“The cumulative supply of retail space in Klang Valley stands at circa 66.09 million sq ft as of 1H22, following completion of Mitsui Shopping Park LaLaport Bukit Bintang City Centre (LaLaport BBCC) and Malaysia Grand Bazaar,” he further explained.
Ooi also stated that the incoming retail supply to cater to a wider customer base includes KSL Esplanade Mall in Klang, IOI City Mall Phase 2 in Putrajaya, Retail Component of Datum Jelatek in Taman Keramat, as well as EcoHill Walk in Semenyih — in accordance to the existing LaLaport BBCC which features authentic Japanese shopping experience.
Among the reasons that encourage retailers and shopping centre operators to continue using omnichannel in increasing sales and engagement include a clear shift in consumer behaviour due to the pandemic and the acceleration in digital transformation.
Knight Frank property management director for mall management Yuen May Chee also stated that mall operators have been persistently continuing to personalise retail experiences to cater to consumers’ preferences, as well as to address the health and concerns of shoppers through asset enhancement initiatives.
“While some have turned to instal air purifying systems in all of their retail premises, others have delved into social commerce — offering shoppable live streams and collaborations to introduce personal shopping services, as well as creating online platforms to provide affordable retail spaces for small businesses.
“There is also a rise of green initiatives as shown by Lotus’s Stores (M) Sdn Bhd with its rooftop solar photovoltaic project at 12 stores and one distribution centre, offsetting over 6,600 tonnes of carbon emission annually,” he added.
On the occupancy rate, major malls like Suria KLCC, Pavilion Kuala Lumpur, Mid Valley Megamall and Sunway Pyramid, continue to retain solid crowd pulls and have stable occupancy rates.
Meanwhile, Knight Frank Sabah ED Alexel Chen also stated that the total retail space in shopping complexes in Kota Kinabalu is at 5.78 million sq ft at the end of 2021, with an average occupancy rate of about 76.7%.
“However, mature and well-performing retail malls in the city, namely Imago Mall, Suria Sabah Shopping Mall, Centre Point Sabah, Karamunsing and City Mall, continue to record healthy occupancies in the region of 80% to 90% with monthly asking rental rates ranging between RM2 and RM25 per sq ft.
“Amid improving consumer sentiment, there was a healthy return of footfall to the malls, especially during weekends and public holidays,” he further added.
Overall, Malaysia’s economy is expected to continue improving in 2H22, despite the 2.25% increase in the Overnight Policy Rate, rising domestic and global inflationary pressures and ongoing geopolitical tensions which may affect growth momentum.