Olive Tree Property Consultants chief executive officer Samuel Tan
PETALING JAYA: The industrial property market is set to maintain its solid performance for the remainder of the year on the back of increased investment activities in data centres and the electrical and electronics (E&E) sector.
According to Knight Frank, in its real estate highlights report for the first half of 2024, the manufacturing sector is expected to grow by 3.5% in 2024, driven by the recovery of export-oriented industries and sustained growth in the domestic cluster.
It noted that the E&E sector, constituting about 40% of the country’s exports, is anticipated to rebound, buoyed by global technological trends like digitalisation, the Internet of Things, 5G networks and electric vehicles.
“In the Klang Valley, the industrial market started strong in 2024 with increased transaction volumes and values in the first quarter.
“There is increasing interest from institutional investors and funds in the industrial sector, suggesting a growing appetite for assets that cater to the rise of the digital economy, as well as ongoing need for manufacturing and logistics space.”
Knight Frank said yield-accretive industrial assets in established locations remain highly sought after, as investors continue to capitalise on stable returns from the industrial sector.
“Rental rates of prime industrial space in Klang Valley are anticipated to remain resilient in 2024, attributed to the limited availability of prime industrial space in both existing and new supply.
“The construction of high-specification logistics facilities with sustainability features at higher construction costs is likely to command higher rental rates, leading to overall rental rate growth in the medium term.”
Amid the “flight-to-quality” and “flight-to-sustainability” trends, Knight Frank said landlords need to adopt proactive strategies, including incorporating these features into new developments or retrofitting aged warehouses to maintain competitiveness.
“Green and technology-driven features are expected to become standard in upcoming industrial and logistics developments.”
Additionally, Knight Frank said the spotlight on data centres has intensified further in the first half of 2024, with increased investments noted during this period.
“To enhance Malaysia’s attractiveness as a hub for artificial intelligence (AI) data centres, the government, through the Investment, Trade and Industry Ministry, will introduce special incentives.
“The Malaysia Investment Development Authority will also implement an incentive framework promoting energy-efficient equipment and renewable energy use, aimed at fostering AI data centre investments and bolstering Malaysia’s competitiveness in this sector.”
Against this backdrop, Knight Frank said the industrial property market in the Klang Valley remains robust and resilient in 2024.
In Johor, it said the industrial sector has remained active, with increased market activities in the first half of the year.
“Data centre investments are a boon but could strain affordability for other industries due to higher land prices for suitable plots.
“Government intervention might be necessary to balance data centre growth with access for traditional users.”
Olive Tree Property Consultants chief executive officer Samuel Tan said industrial properties in Johor had performed well, riding on the improved economic outlook from the slew of positive news flow.
“Catalytic initiatives include the Johor-Singapore Special Economic Zone (JS-SEZ) and Forest City Special Financial Zone (SFZ),” he told StarBiz.
Tan expects the industrial sector in Johor to perform well for the remainder of the year.
“Riding on the positive developments from increased investment activities in the data centres and E&E sectors, we foresee more corporations, especially those based in Singapore, to capitalise on the initiatives like the JS-SEZ and SFZ to set up plants in Johor.
Despite the influx of data centres in the past year into Malaysia, Olive Tree Property Consultants executive director Tan Wee Tiam said there are many data centre operators that 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.”
According to Wee Tiam, there are about 50 data centres in Johor that are either at the application, construction or operation stage.
“This is quite an achievement, notwithstanding the challenges like power and water supplies.
“The spillover from the data centre will be the need for new renewable energy and water sources. We will be seeing more solar farming, water desalination plants and other alternative sources.
“Also expected are related sectors emerging such as high-end E&E, semiconductor, medical devices, pharmaceutical products and the likes.
“Obviously, the housing sector will benefit to house the workers working nearby.”
