Who says property market’s down
Good growth seen in Klang Valley industrial property segment
WHILE the Malaysian property market may be facing an oversupply, not all sub-sectors have seen its transactions slowing down significantly or grinding to a halt.
Recently, Area Management Sdn Bhd chairman Datuk Stewart Labrooy revealed that the industrial property segment is still seeing good growth in terms of both transaction and value.
“In Selangor, there were 840 transactions worth RM4.45bil recorded in the first half of 2018,” he said at Rahim & Co’s one-day seminar on the Malaysian property market, titled Where are we heading post-GE14?
“There was a recorded increase of 16.2% in volume and 70.1% in value compared with the first half of 2017, where there were 723 transactions worth RM2.61bil.”
Labrooy added that prices were, on the whole, stable with several movements recorded in strategic areas with good accessibility.
“One-and-a-half-storey terraced factories located in established areas of Klang and Gombak observed 11.8% and 17.8% growth.”
In terms of the industrial sector’s medium-term outlook, Labrooy said the preference of logistic warehouses would predominantly be within the Klang Valley.
“In Shah Alam, there is a large concentration of manufacturing activities (for storage of goods) and large population catchment (as distribution centres).”
As for Penang, Labrooy said demand for warehouse space has been reasonably steady as existing supply has been well occupied.
“The majority of warehouses that have been studied are owner occupied, while Axis REIT has leased its warehouse facilities out to logistics companies and have registered a full occupancy rate across its entire portfolio of warehouses in Penang.
“Overall, a large proportion of warehouses were owned by logistic players (58%), followed by real estate investment trusts (30%), manufacturing (11%) and trading (1%).”
In tandem with the scarcity of industrial land on Penang island and its high pricing, Labrooy said a large extent of prospective future warehouses on the island would not be evident, particularly in the longer term.
“Seberang Prai would continue to attract industrialists due to the attractiveness of its pricing when weighed against Penang island and also due to the availability of remaining plots of land in the Batu Kawan Industrial Park.”
In Johor, he said logistic warehouses within Pasir Gudang and Tanjung Pelepas are likely to continue registering high occupancy rates due to the readily available manufacturing activities in the area, as well as the excellent infrastructure in terms of connectivity and accessibility.
“Demand for new manufacturing facilities are gaining traction for custom build to lease developments like i-Park@Indahpura and i-Park@ Senai Airport City. These developments are becoming increasingly popular with Singapore and multinational clients.”
Going forward, Labrooy believes that the greatest impact and growth for the Malaysian real estate will be the industrial sector.
“The fourth industrial revolution (or Industry 4.0) will rejuvenate the stagnant industry of industrial estates while attracting investors for its renewed demand due to e-commerce and logistics operations.”
Industry 4.0 refers to the paradigm that machines are now able to autonomously adapt and coordinate their tasks to meet human needs.
Labrooy added that abandoned and existing warehouses that lie on valuable land would also be resurrected with modern infrastructure.
“Investors for warehousing and distribution hubs increased 65% globally as cross-border e-commerce took off. Warehouses and distribution centres are transformed into fulfilment centres equipped with the capabilities to drive profitability.”
E-commerce boom
Citing statistics, Labrooy pointed out that e-commerce was growing at 25% year-on-year within Asia Pacific, with South-East Asia set to be a huge biggest beneficiary of this growth.
“This promise of fast growth has lured China’s two e-commerce giants, Alibaba and JD.com, to explore opportunities in South-East Asian countries.
“JD.com executives recently hinted that the company is looking to expand outside China, and it’s said to be considering an investment in Indonesian e-commerce company Tokopedia.”
Labrooy added that Alibaba paid US$1bil (RM4.2bil) last year for a controlling stake in Singaporebased Lazada, which owns a portfolio of popular e-commerce sites across the region.
“In addition, Alibaba is working to set up a digital free-trade zone in Malaysia, and has signed a memorandum of understanding with the government there and municipal authorities in the Hangzhou region of China to simplify cross-border trade between the two regions.”
Labrooy emphasised such moves were putting pressure on local players.
“Sea Ltd, an Indonesian Internet company formerly known as Garena that operates a major e-commerce marketplace, recently raised US$550mil (RM2.3bil) to rapidly expand its presence in SouthEast Asia before the Chinese giants become more entrenched,” he said.
On the local front, a recent FedEx-commissioned study found that small and medium-sized enterprises (SMEs) are looking to e-commerce as a means to boost their earnings prospects.
The study, called Global is the New Local: The Changing International Trade Patterns of Small Businesses in Asia Pacific, reveals an average of 88% of Malaysian SMEs are adopting digital economy platforms such as e-commerce, mobile-commerce and social-commerce platforms.
The study revealed that 61% of local SMEs are optimistic that the e-commerce platforms will help contribute to increased revenue growth in the next 12 months.
It also found that 69% of Malaysian SMEs have incorporated Industry 4.0 technologies into their operations such as mobile payments, automation software and big data/analytics in particular.