Rahim & Co International Sdn Bhd real estate agency chief executive officer Siva Shanker
PETALING JAYA: The real estate investment trust (REIT) segment, which has been performing commendably this year, is expected to maintain its steady momentum into 2025.
This, experts said, will be supported by sustained occupancy and rental rates, as well as new asset injections.
Rahim & Co International Sdn Bhd real estate agency chief executive officer Siva Shanker said that Malaysian REITs, overall, have “fared well” this year.
“Local REITs have been performing well this year. Many have been aggressively adding new assets to their portfolios with no issues of securing financing for the acquisitions.
“It’s not surprising if REITs are considered the darling of the real estate market right now,” he told StarBiz.
Indeed, the past several weeks have seen several REITs announcing the addition of new assets to their investment portfolio.
Just last week, KIP-REIT announced that it had successfully completed the acquisition of the D’Pulze Shopping Centre in Cyberjaya – its largest-ever acquisition to date – for RM320mil.
Earlier in the month, Pavilion-REIT announced that it was proposing to acquire the Banyan Tree Kuala Lumpur and Pavilion Hotel Kuala Lumpur in the Bukit Bintang area for a combined RM480mil.
In November, AME-REIT announced that it would be acquiring four fully-leased industrial properties in Iskandar Malaysia worth RM119.5mil.
Siva noted that interest in industrial properties have been picking up over the years.
“The industrial REITs sector has been steady for a while – so much so that there have been some murmurs of oversupply.
“When one sector does well, everyone jumps into it and then it starts to crumble.”
Supply of warehouses has risen significantly especially since the onset of Covid, due to the need for increased inventory space to meet growing demand.
As such, Siva said the supply of small cookie-cutter units such as terraces and semi-Ds, have been on the rise over the years.
“Instead of more warehouses, there should be a focus on manufacturing plants.
“A warehouse is just a temporary storage facility.
“If a plant is not manufacturing any products, how many warehouses do you need?”
Investments in data centre capacity from foreign investors, especially from the likes of Google, Amazon and Nvidia, are also spurring the local industrial sector, noted Siva.
“Singapore’s moratorium on data centres saw many companies looking to nearby countries like Malaysia to channel their investments,” he said.
Singapore set a moratorium on data centres between 2019 and 2022, prompting a rapid migration to other countries within South-East Asia, especially in Johor and Batam, Indonesia.
“While it’s great that we are seeing many foreign investors coming into the country and plenty of jobs being created, it’s also important to ensure that we have the proper infrastructure to facilitate the data centre developments,” said Siva.
Going into 2025, Siva is optimistic that the industrial REITs sector will continue to “hold steady.”
Meanwhile, Maybank Investment Bank Research (Maybank IB) in a recent report said the retail segment will continue to face challenges from new supply, especially in the Klang Valley totalling around 1.8 million sq ft by 2025.
“Notable incoming supplies include Elmina Lakeside Mall in Shah Alam and Pavilion Damansara Heights Phase 2, both by the second half of 2024 and 118 Mall @ Merdeka 118 in the Kuala Lumpur central business district by 2025.
“While the incoming space could soften rental rates and pose occupancy challenges, we remain positive on matured malls located in prime locations, as we expect their high occupancy rates to sustain due to continued strong demand for their retail space.”
Similarly, Siva is also positive about the outlook for retail REITs in 2025.
“Many retailers are seeing good sales, even surpassing pre-Covid levels,” he added.
As for the office segment, Maybank IB said the overall average occupancy rate for purpose-built offices in the country stood at 71.6% in the second quarter of 2024, which was still below pre-pandemic levels of 81.1% in 2019.
“Going into the second half of 2024, 1.4 million sq ft of office space will be added in the Klang Valley.
“This will be on top of the 0.4 million sq ft completed in the first half of 2024, bringing the total to 1.8 million sq ft for the year.”
The research house noted that Klang Valley offices continue to attract multinational corporations establishing their regional hubs.
“Rental rates have thus far demonstrated positive momentum, driven by high-quality office spaces,” it said.
