Why Malaysian property investors are putting their money on the industrial sector

Two-thirds of investors believe it will enjoy capital value appreciations this year.

Knight Frank recently conducted its Malaysia Commercial Real Estate Investment Sentiment Survey (CREISS) for 2022, revealing where commercial property investors are looking to venture in the near term.

According to Amy Wong, Executive Director of Research & Consultancy, Knight Frank Malaysia, “People appear to have a better risk appetite for alternative investments in the next 2 to 3 years. The survey revealed almost equal interest to participate in serviced residences / hotels, co-working / flexible offices, senior living / retirement homes, and data centres. And they are not just focusing on Klang Valley, location-wise,” as the survey points to Sabah, Johor, and Penang among the popular destinations for these alternative investments. 

In regards to capital value, more than two-thirds of the respondents (76%) expect the Industrial and Logistics sub-sectors to enjoy capital value appreciations in 2022, with slightly more than half the respondents (57%) also anticipating the same for the Healthcare sub-sector. In terms of yield performance, 68% of respondents expect yields to increase in the Logistics sub-sector, with anticipated higher yields for Healthcare and Industrial sub-sectors. Predictably, these opinions are comparable on increase in rents, with rents of Logistics properties expected to increase, according to 64% of respondents; and 53% also agreeing that increases are expected in the Industrial sub-sector, in line with growing demand for space in these 2 sub-sectors. 

There are similar expectations in the occupancy rate for the same two sub-sectors, and it is worth highlighting that there is a predicted reduction in occupied Office space, due to the reality of continued pressure on occupancy rates and rents as supply continues to outpace demand. These views are unsurprisingly echoed in the predictions on the market itself.  

Wong continues, “Through this survey, which highlights the Logistics and Industrial sub-sectors as the favourites, respondents have expressed their confidence that these sub-sectors will be the quickest to recover within the next twelve months, along with the Healthcare sub-sector. The traditional sub-sectors of Hotel / Leisure, Office, and Retail are seen by respondents as a long-term play.”

Rounding off the overall thoughts of respondents in the survey, Sarkunan Subramaniam, Group Managing Director, Knight Frank Malaysia says, “As we navigate the new economy in a somewhat changed world that is anticipating further disruption, there is a need to cultivate resilience in real estate portfolios – to anticipate risk and minimise disruption in an increasingly complex world. The growing awareness and adoption of environmental, social, and governance (ESG) frameworks in the real estate industry will help drive the value of sustainable real estate into the future.”