Growing interest in alternative investments in Sabah, Johor and Penang: survey

THERE seems to be a greater risk appetite for alternative investments in Malaysia over the next 2 to 3 years, said property consultancy Knight Frank Malaysia on Monday (Jun 27) as it released the latest sentiment survey on Malaysia’s commercial real estate investment.

The survey — which polled 200 representatives at senior management levels across Malaysia’s commercial property industry — found an almost equal interest to participate in serviced residences, hotels, co-working spaces, flexible officers, senior living and retirement homes, and data centres.

There is also an interest in other alternative sub-sectors such as workers’ accommodation, wellness centres, student accommodation and themed or recreational parks.

Apart from the Klang Valley area, there is growing interest for these alternative investments in Sabah, Johor and Penang, the survey noted.

“Other than these, respondents also seeing potential in the industrial and logistics sub-sector, hotel and leisure sub-sector and retail sub-sector, with the reopening of the economy and activities reported to be returning to pre-pandemic levels,” said Sarkunan Subramaniam, the group managing director of Knight Frank Malaysia.

Nearly two-thirds (63 per cent) of the respondents were developers, followed by commercial lenders (22 per cent) and fund or real-estate investment trust managers (15 per cent). Around a third of the respondents’ commercial real estate projects are located in the Klang Valley (31 per cent), followed by Johor (17 per cent), Penang (10 per cent), Sabah (9 per cent) and Negeri Sembilan (7 per cent).

Amy Wong, Knight Frank Malaysia’s executive director of research and consultancy, said that 76 per cent of those polled expect the industrial and logistics sub-sectors to enjoy capital value appreciations this year. In terms of rental, over half of the respondents anticipate higher rental growth in these 2 sub-sectors.

The healthcare sub-sector is also one to watch in 2022, with 57 per cent of respondents expecting steady capital appreciation and rental growth there.

When asked about the best locations, the majority of the respondents expressed an interest to invest in Penang, Sabah and Johor.

While properties in Penang – an island off the north-west coast of Malaysia – have continued to garner strong interest from investors over the years, there are concerns over a growing number of dilapidating pre-war and heritage buildings which are now vacant due to a lack of maintenance.

In a recent report published in The Star newspaper, Penang Island City Council councillor Wong Yuee Harng was quoted as saying that more than RM300 million (S$94.3 million) worth of heritage and pre-war buildings have been left unoccupied and unattended due to the Covid-19 pandemic.

According to a property valuation consultant, the abandoned post-war buildings in the city were valued at around RM200 million.

Penang’s pre-war and heritage buildings were once extremely popular with foreign investors, especially those from Singapore. It was reported in 2016 that over 150 of such buildings are owned by Singapore investors.

On the whole, Knight Frank’s Subramaniam noted that respondents in the survey are conscious of several risks ahead for the rest of this year.

“The rise in commodity prices, the undervalued ringgit, the potential impact of new variants and other infectious diseases, as well as political uncertainty – are all factors that do not work in favour of promoting commercial real estate investment. The low interest rate environment, however, remains a key favourable factor,” he said.