PETALING JAYA: Property observers are upbeat on the local industrial property market for this year, as they see the market underpinned by increased investment activities from data centres and the electrical and electronics (E&E) sector.
This is especially prevalent in Johor, noted Olive Tree Property Consultants chief executive officer Samuel Tan.
“We foresee more corporations, especially those based in Singapore, capitalising on the initiatives like the Johor-Singapore Special Economic Zone (JS-SEZ) and Special Financial Zone to set up plants in Johor,” he told StarBiz.
Despite the influx of data centres in the past one year into Malaysia, Tan noted that many data centre operators are still keen to set up plants in Johor.
“In general, developers also welcome prominent data centre operators to be their anchors in the industrial parks.
“Nevertheless, the issues of availability of sufficient power and water supply have increasingly become a concern.
“The government is working hard to ensure the sustainability of this sector by upgrading the infrastructures and tightening the plant specifications.”
Goh: Key sectors in the country will continue to attract FDIs.
Meanwhile, Savills Malaysia logistics, industrial and data centre head Kevin Goh said key sectors in Malaysia will continue to attract foreign direct investments (FDIs) from the E&E, semiconductors, medical technology, pharmaceutical, automotive (especially electric vehicles) and green technology industries.
“Concentrations will still be at the Northern, Central and Southern regions, and with Sabah and Sarawak also gaining momentum due to rapid infrastructure developments.
“More smart manufacturing plants will also be built to minimise manufacturing downtime and production waste for 2025.”
As for data centres, Goh predicts a “go-slow” on new site acquisitions by (data centre) operators due to concerns in development approvals.
CBRE | WTW valuation, research and consulting managing director Ungku Mohd Iskandar Ungku Ismail said demand for industrial spaces is shifting towards managed parks with high-tech facilities, artificial intelligence integration and green real estate and LEED (Leadership in Energy and Environmental Design) certifications.
“These parks support advanced manufacturing, innovation and sustainability, creating the ideal environment for growth.
“Improved infrastructure, such as the East Coast Rail Link, West Coast Expressway and Pan-Borneo Highway, has boosted industrial park development.”
Additionally, he pointed out that the expansion of data centres to regions like Sarawak and northern Peninsular Malaysia is noteworthy.
“This trend is driven by the increasing demand for data storage and processing capabilities, extending beyond the traditional hubs of Greater Kuala Lumpur and Johor.
“The introduction of the Data Centre Planning Guidelines is expected to further stimulate growth by streamlining the application and approval processes for new projects.”
Hong Leong Investment Bank (HLIB) Research in a recent report said the industrial sector is expected to see stable growth with ongoing long-term potential.
“The transaction volume for industrial properties in Greater KL saw a notable increase in the first nine months of 2024 (9M24), with 29 deals totalling RM1.4bil compared with RM1.2bil in the previous corresponding period in 2023, fuelled by robust economic growth.”
In 9M24, HLIB Research said approved manufacturing investments reached RM88.8bil, higher than pre-Covid levels (the average levels between 2016-2019 was RM73.1bil) but below RM100bil achieved in 9M23.
“Overall, we believe Malaysia will still remain attractive for FDIs and domestic direct investments in 2025, given a slew of promising government initiatives like the New Industrial Master Plan 2030 and National Energy Transition Roadmap.
“As such, the outlook for industrial properties continues to be positive.”
Meanwhile, Tan believes that Malaysia as a whole would also likely benefit from the strategy of China + 1 adopted by many multinational companies.
“This is especially so in view of the uncertainty posed by the US-China trade war. Many corporations exporting to the United States would like to pre-empt the drastic hike in tariff for goods manufactured in China and the consequential retaliation.
“Malaysia, being a neutral ground appears to be one of the popular destinations being considered by these corporations.”
Nevertheless, Tan noted that the “tariff escalation appears to be a foregone conclusion under US President Donald Trump’s administration.”
“The only variable is the extent of tariff increase and the corresponding retaliation from other countries.
“Malaysia, being an exporting country, will be adversely affected when the trade war escalates with a ripple effect on the cost of doing business.
“In short, the threat of tariff escalation and retaliation from affected countries (namely the United States, China, Canada, Mexico and European countries) moving forward remains a possible ‘black swan’ in 2025.”
Tan noted that Malaysia’s stable political situation and pro-business stance make the country a good platform to attract higher value-added, capital-intensive and knowledge-based industries.
“We are possibly at the critical juncture to transform our industrial landscape to move up the value chain.
“Initiatives like the JS-SEZ can help propel the country to move up the transformation value chain,” he said.