Malaysian real estate getting a boost from chip and other high-growth sectors

MALAYSIA’S key real estate sectors are poised for “promising growth trajectories” – in particular, the industrial market, as it rides global high-growth drivers such as semiconductors, according to a Knight Frank Malaysia report.

The country’s industrial sector has experienced “significant growth” due to increasing global demand for manufactured goods and the establishment of new industrial parks, among other factors.

“This positive trajectory is expected to continue, driven by ongoing investments, technological advancements and a growing emphasis on sustainability,” said the report, adding that Malaysia’s commitment to renewable energy is an opportunity for collaboration with global investors in green tech.

“With a robust manufacturing ecosystem and a strategic location, Malaysia is poised to attract investments in high-growth sectors such as electronics, semiconductors and medical devices,” it added.

The country is also well-positioned to tap shifts in global trade and supply chains, especially after the 2024 US presidential election, said Knight Frank. For instance, Malaysia’s market access and its role in global trade could improve on potentially renewed US engagement in multilateral trade agreements.

Malaysia has already benefited from US-China tensions: US tariffs on Chinese imports have driven companies to shift production away from China and into the South-east Asian country.

The country’s industrial market is a clear winner, as its driven by demand for modern facilities and “strategic” investments into “smart and sustainable” industrial parks, said Knight Frank.

Transaction values in the country’s industrial market are already up as it aims for high-value sectors, according to data from Knight Frank. During the first nine months of 2024, the industrial sector in Klang Valley recorded a significant increase in both transaction volume and value of 8.6 per cent and 25.7 per cent, respectively, compared to 2023.

This area’s industrial real estate market is well-positioned to tap growing demand for logistics, smart technologies and sustainable solutions, said Knight Frank.

During the first nine months of 2024, the transaction volume of industrial properties in Johor saw a year-on-year (yoy) decline of 6.1 per cent. However, transaction value spiked 44.6 per cent compared to 2023.

Efforts include Selangor’s plans to develop a semiconductor hub, as well as a hub called Northern TechValley@BKE in Penang – set to be completed by 2029 – that aims to draw companies from sectors such as semiconductors, electronics, medical technology and logistics. Penang is also developing a project called Silicon Island, meant to be a tech hub.

“The continued growth of the manufacturing and logistics industries, coupled with the rising demand for e-commerce fulfilment, is driving demand for industrial land and buildings,” Knight Frank said in reference to Penang.

Meanwhile, DHL Express has invested RM300 million (S$91 million) into a sort facility at the Kuala Lumpur International Airport, which Knight Frank described as a “strategic hub” for cross-border trade in South-east Asia.

Over in Sabah, with renewable energy as the state’s key focus, notable industrial projects in 2024 included a green steel project and solar glass manufacturing plant. “Sabah’s industrial sector is poised for sustained growth, leveraging its strategic location as a gateway between South-east Asia and the global market, with close proximity to major shipping routes,” said Knight Frank.

Spotlight on Johor

Johor’s ability to draw significant foreign direct investments and establish a data centre ecosystem is enhancing its appeal to global players, said Knight Frank.

It noted that with Johor’s positioning as a hub for sustainable and high-tech industries, its industrial property sector is “poised for sustained growth”.

The report highlighted that strategic locations such as Kulai, a town in Johor, are “emerging as investment hot spots”, driven by their focus on high-value industries including logistics, clean technology and advanced manufacturing.

“Infrastructure expansions, such as port enhancements and the development of advanced industrial parks, are further solidifying Johor’s position as a regional trade and investment hub,” said the report.

Meanwhile, heightened industry awareness of environmental, social and governance initiatives is driving a gradual shift towards green industrial parks, with Johor seeing a growing supply of such parks that integrate renewable energy and technological advancements.

Johor is also “gaining traction among tenants for Grade A office spaces” due to lower rental rates, reduced operational costs, as well as potential incentives from the Johor-Singapore Special Economic Zone.

Over in Johor’s hospitality sector, the future looks bright, with “sustained growth and increasing regional popularity expected in the years to come”.

According to the report, as at the third quarter of 2024, the industry comprised 488 hotels offering a total of 31,971 rooms, a yoy increase of 0.8 per cent and 2.5 per cent, respectively.

With nine hotels under construction and eight having received planning approval, an additional 5,478 rooms are set to be delivered.

The tourism sector is experiencing a strong recovery post-pandemic, as seen in two indicators. The average occupancy rate for three- to five-star hotels in Johor recorded an improvement from 61.4 per cent in Q3 2023 to 66.6 per cent in Q3 2024. Second, the average daily rate for selected three- to five-star hotels in the state saw a robust yoy growth of 19.5 per cent to RM267 per night.

With rapid growth in the industrial sector and a strong recovery in the hospitality industry, Amy Wong, executive director of research and consultancy at Knight Frank, said that there are “plenty of opportunities for investors and stakeholders”.