Malaysia’s Industrial Real Estate Analysis: Trends and Opportunities
In February 2024, the Production Index for the manufacturing sector saw a year-over-year increase of 4.9%, as reported by Malaysia's Industrial Production Index. According to the Department of Statistics Malaysia, the sales value of the manufacturing industry experienced a significant double-digit increase of 10.3%, reaching a record RM 145.2 billion in February 2023.
Notably, over two-thirds of the sales revenue was generated by key subsectors: Electrical & Electronic Products (33.2%), Petroleum, Chemical, Rubber & Plastic (24.7%), and Food, Beverages & Tobacco (17.5%). This substantial growth is accompanied by an increasing demand for industry property and factory rentals across Malaysia, reflecting a robust expansion in the nation’s industrial real estate markets. This uptick in manufacturing output positions Malaysia as an attractive destination for new investments in industrial zones. In this article, we’ll explore some of the upcoming developments and trends across Malaysia’s various industrial parks.
Figure 1: YoY change in Sales Value of Manufacturing Sector (%)
Source: Manufacturing Statistics Malaysia, Department Statistics of Malaysia
Growth Trends for Industrial Real Estate Across Malaysia
The recovery of Malaysia’s manufacturing sector is poised to boost demand for industrial real estate, particularly within industrial zones that host electronics clusters. According to DataSense by PropertyGuru For Business, Puchong in Selangor exhibits the highest Demand Index for industrial property and factory rentals. Puchong boasts a robust local industrial base and enjoys a strategic location near other major growth centres, making it a sought-after location for businesses looking for factory rentals close to operations. Notable industrial areas in Puchong include Kinrara Industrial Park, Puchong Industrial Park, Taman Perindustrian Puchong Utama, and Bandar Bukit Puchong Industrial Park.
Shah Alam, ranking second, is home to several rapidly expanding clusters for the Electronics and Electrical, as well as Life Sciences manufacturing sectors. Industrial parks such as Shah Alam Industrial Park, Glenmarie Industrial Park, and Kota Kemuning are recognised for their electronic and electrical clusters, while Bukit Raja Selatan Industrial Park and Hicom Industrial Park cater to the life sciences sector.
In third place is Johor Bahru, which is emerging as an industrial real estate hotspot for technology investments. According to a report for the first half of 2023 by Malaysian property agency Zerin Properties, Johor is poised to attract RM 17 billion in new data centre investments in 2024, following RM 51.1 billion invested in 2022. This investment trajectory underscores the region's growing significance as a hub for industrial and technological growth.
Figure 2: Top 10 City/Area by Demand Index of Factory to Rent
Source: DataSense by PropertyGuru For Business
Impact of Geopolitical Trade Tensions on Malaysia’s Manufacturing Industry
Amid trade tensions between Beijing and Washington, foreign companies are increasingly relocating their manufacturing facilities out of China to establish production hubs in other nations. This strategy, often referred to as "China Plus One," has notably benefited Malaysia, especially when it comes to the recovery and growth of its manufacturing industry. Since 2021, Malaysia has witnessed a steady rise in foreign direct investment in the technology sector, with semiconductor giants Intel and Infineon Technologies each committing US$ 7 billion to expand beyond mere packaging, assembling, and testing.
According to a ChannelNewsAsia report, Malaysia’s existing industrial real estate ecosystem—particularly in Penang and the adjacent Kulim in the state of Kedah—has become a magnet for technology companies seeking to mitigate risks amid intense US-China rivalries over cutting-edge technologies. These areas have seen a noticeable increase in demand for factory rentals, driven by the need for global technology companies to de-risk and find suitable locations to support their complex manufacturing operations.
Penang and Kulim: Unlikely Beneficiaries of Heightened Geopolitical Tensions
DataSense reports that this shift towards de-risking is already influencing the industrial real estate markets in Penang and Kulim. In Penang, Batu Kawan experienced the most significant increase in demand for factory rentals, soaring by 86.3% month-on-month in March 2024 (Figure 3). The median rent per square foot has been on an upward trend since 2021, as illustrated in Figure 4, despite the then-prevailing uncertain economic conditions.
Batu Kawan Industrial Park continued to attract several global MNCs in the medical technology and electrical sectors. For example, Boston Scientific Corporation, a global leader in medical device technology, announced a new expansion of its operations there in November 2022. Moreover, Western Digital operates a facility in Penang that was recognised as a Sustainability Lighthouse by the World Economic Forum. The sustained interest in Penang's industrial real estate zones is a clear indicator of the robust health of the state’s manufacturing industry, with ongoing foreign direct investment reinforcing this upward trajectory. As more companies implement their “China Plus One” strategy, industrial parks like Batu Kawan are set to attract more global manufacturers, further boosting demand for factory rentals.
Figure 3: Supply Index and Demand Index Trend for Factory to Rent in Batu Kawan
Source: DataSense by PropertyGuru For Business
Figure 4: Demand Median Rent Per Square Foot
Source: DataSense by PropertyGuru For Business
Elsewhere, Kulim also exhibited a robust 13.5% month-on-month increase in demand as of March 2024, as detailed in Figure 5. Although supply has been on an upward trajectory since January 2023, the median demand rent remains elevated. Specifically, the median rent per square foot was RM1.67 per month in March 2024, an increase from RM 1.50 recorded in March 2023, as shown in Figure 6. This trend underscores the sustained market strength and investor interest in Kulim's industrial real estate.
Figure 5: Supply Index and Demand Index Trend for Factory to Rent in Kulim
Source: DataSense by PropertyGuru For Business
Figure 6: Demand Median Rent Per Square Foot
Source: DataSense by PropertyGuru For Business
The growth in demand for industrial real estate, factory rentals and investor interest in Kulim and Penang is poised to stimulate employment in the region and create opportunities for local enterprises that support multinational corporations. While heightened geopolitical tensions have contributed to slower economic growth in Europe and the US, cities in Southeast Asia may emerge as unlikely beneficiaries as global companies seek to broaden their supply chain and explore operations in new countries to diversify their manufacturing bases.
Future of Malaysia’s Industrial Real Estate
As global manufacturing trends evolve, regions in Malaysia with strong industrial bases like Penang and Kulim will continue to court these companies by enhancing their capacity to bridge the gaps in the global supply chain, positioning themselves as critical nodes in international business networks to attract direct foreign investment. This strategic positioning is fueling the growth of the manufacturing sector and expansion of industrial parks in the country, making it a prime opportunity for those looking to invest in Malaysian industrial property and stay ahead of market trends.
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