E-commerce drives demand for top grade industrial parks
HIGH-END WAREHOUSING: AREA Logistics to be largest integrated distribution centre
GRADE A industrial parks are in demand in Malaysia as ecommerce expands, slowly taking over the business of brickand-mortar retail.
E-commerce is becoming the most popular method of purchase in Malaysia. More people are moving to online buying and putting products into their shopping cart as there is better mobility, improved Internet and enhanced security.
From 2010 to 2014, Malaysia’s ecommerce market recorded a compounded annual growth rate of 31 per cent.
According to online statistics portal Statista, the e-commerce market in Malaysia is expected to reach US$991.1 million (RM4.1 billion) in revenue this year, excluding e-services.
The global e-commerce industry is projected to surpass US$3.5 trillion (RM14.5 trillion) within the next five years.
But e-commerce is not the only market for Grade A industrial parks. The industrial parks are attracting logistics companies, courier firms, manufacturers, small and mediumenterprises (SMEs) and multi-national companies (MNCs) as they look for better facilities for storage, distribution and last mile delivery.
There are very few local developers that can actually build a wellequipped industrial park. A majority of them prefer to build residential and commercial properties as there are less challenges, compared with industrial park development.
Seeing the potential in industrial park development, real estate private equity and advisory firm AREA Management Sdn Bhd last year launched Malaysia’s first industrial development fund, AREA Industrial Development Fund 1 (AIDF-1).
The fund’s management company, AREA Advisors Pte Ltd, had raised US$150 million from local and foreign institutional investors.
The investing partners are the Employees Provident Fund, the Canada Pension Plan Investment Board and Denmark’s Sparinvest Properties Investors.
The main thrust of the fund is to invest and develop gated and guarded Grade A industrial estates that come with recreational facilities and workers’ accommodation on site for a plug and play experience for investors.
The fund’s maiden project is AREA Logistics@Ampang, a large high-end warehousing facility in Ulu Klang.
AREA Logistics will have 1.5 million sq ft of net lettable space, making
Datuk Stewart LaBrooy it the largest integrated distribution centre ever built in Malaysia.
The four-level facility will cater to the increasing demand for an inner city distribution centre in Kuala Lumpur and Selangor. It will include space for e-commerce, parcel sorting, self storage, courier services, cold chain logistics and last mile delivery.
AREA executive chairman Datuk Stewart LaBrooy said the facility would help to speed up deliveries within Kuala Lumpur and save operators down time in deliveries to their customers.
“We are getting the final drawings ready for submission. Land clearing has started and we hope to commence construction by the end of next month. It would take 18 months to build,” he told Property Times.
AREA was targeting companies looking for the last mile delivery, especially e-commerce players, food industry, supply-chain firms, courier firms and fast-moving consumer goods, he said.
“E-commerce is a brand new industry that is starting to take hold in Malaysia. I think E-commerce will balloon to a RM20 billion business by 2020. That is going to create another set of economic drivers.
“It also gives the young people a new avenue for business growth. You don’t need a shop to run a business anymore. It can be virtual. I can see very clearly what is going to happen in the future and that is why we are building this facility,” said LaBrooy.
He was the chief executive officer of Axis REIT Managers Bhd from August 6 2008 to December 31 last year. The company handles the industrial logistics, office-centric Axis REIT fund and LaBrooy was responsible for the overall management and operations of the REIT.
LaBrooy is not a newcomer in industrial park development. In 2012, he invested in the 81ha i-Park and 14.18ha SME City in Kulai Jaya, Johor, via AME Group, in partnership with Axis IE Sdn Bhd, a member of the Axis Group.
AME Group was set up by him and other investors with Axis Group as a shareholder.
i-Park redefines how industrial estates should be built. It is gated and guarded with managed worker accommodation on site urban parks with full services, including highspeed broadband, and a high level of customisation for customers.
Meanwhile, LaBrooy said there were plans by AREA to develop more high-tech industrial parks in Selangor, Johor, Penang and Perak.
“Malaysia is the sixth largest ecommerce player. Malaysians make more orders online than buy directly from stores. The top three categories for e-commerce are air tickets, hotels and cinemas.
“Even fashion, electronics and food have moved to e-commerce. Companies are able to boost their share performance by having an aggressive strategy in terms of the ecommerce business. A huge amount of capital is being ploughed into this in Malaysia and globally,” he added.
LaBrooy said besides logistics, manufacturing, freight, electronics, food, oil and gas, automotive, mining, resources and SMEs, new drivers of growth for e-commerce were expected to come from aerospace, where there were big plans by aircraft manufacturers to move into Asia.
“There is also growing demand for high-quality industrial parks by MNCs and that is another area we are also targeting. We are seeing the return of many MNCs. The MNCs are looking to set up manufacturing and logistics operations in Malaysia after a long hiatus of packing up their bags and going away.
“Malaysia’s key strengths include its strategic location, strong trade policy, good infrastructure and workforce, as well as banking facilities. We have very good International property rights and reasonably well-educated workforce,” he said.