Upcoming Johor-Singapore SEZ to benefit property developers and Reits in industrial, commercial sectors
PROPERTY developers and real estate investment trusts (Reits) in the industrial, commercial and hospitality sectors look set to get a boost when the upcoming Special Economic Zone (SEZ) in Johor, Malaysia is set up.
Singapore listcos with existing exposure to the Malaysian market, in particular, will stand to gain, said market observers.
The Johor-Singapore SEZ, which was formalised in January this year, aims to improve the cross-border flow of goods and people as well as increase investments between both countries.
It will be located within Malaysia’s Johor, with details set to be announced later this year.
Industrial developments
Maybank Securities said in a research note published on Apr 16 that support from various government entities involved in the SEZ can lower the risks of development projects. As such, industrial tenants can benefit from lower cost of operations.
Industrial Reits can also get acquisition opportunities such as CapitaLand Malaysia Trust’s acquisition of three factories in Nusajaya Tech Park in Iskandar Malaysia earlier this year.
Within Singapore, the movement of people across the border can improve demand for retail and business services in the northern and western areas of Singapore where the checkpoints between both countries are located, said Maybank analysts Thilan Wickramasinghe and Chua Hak Bin.
They also expect Reits with commercial assets in the northern and western parts of Singapore to benefit.
Property developers to gain
Within Johor, property development activities could see a “rebound” when the SEZ is in operation given the increased residential and commercial demand, said Peggy Mak, research manager at Phillip Securities Research.
Mak noted that integrated property developer Astaka has broken ground on its residential development.
Mak also believed that Thomson Medical ’s plan to develop its freehold land in Iskandar, Johor, could be “back on the drawing block”.
A higher workforce for tech and construction could likely lead to stronger demand for workers’ accommodation, said Mak.
“There is also talk about housing for healthcare workers in Johor that work in Singapore,” she went on to add.
In this regard, Mak pointed out that Singapore Exchange-listed Centurion Corporation is a first-mover in Johor for such assets, with several existing properties there, and could gain from the bigger demand for workers’ housing in the state.
However, Mak said that the rental property sector in Singapore could be affected by the SEZ if there is less demand from Malaysian employees who choose to live or remain in Johor rather than Singapore.
Tech and data centres
More data centres could be set up in Johor if tech companies move to the SEZ, said Mak.
She said that Malaysia has been “a prime beneficiary” of the chip war between the United States and China, with Penang state already attracting more foreign direct investments from US chip and equipment makers. “The SEZ would also attract these tech companies to set up or expand their manufacturing operations in Johor.”
Some of the companies could set up in Johor as an extension to their Singapore operations. They could also scale back their Singapore operations due to less-restrictive foreign employee policies and Johor’s abundant land and labour.
With a higher concentration of tech companies in Johor, more data centres could be developed in the SEZ, explained Mak.
She noted that Keppel DC Reit already has a data centre in Johor.
Other companies with existing exposure in Malaysia could benefit from the SEZ, said the researchers from Maybank Securities.
These include counters such as Starhill Global Reit , Mapletree Logistics Trust and Frasers Hospitality Trust .
