Knight Frank: Logistics sub-sector to see uptick in 2020

PETALING JAYA (Jan 8): The revival of notable mega infrastructure projects in 2019, namely the East Coast Rail Link (ECRL) and the Bandar Malaysia project in Kuala Lumpur that will house one of the stations of the Kuala Lumpur-Singapore High Speed Rail (HSR); and the Johor Bahru-Singapore Rapid Transit System (RTS) will continue to improve market sentiments and restore investors’ confidence, according to Knight Frank Malaysia in its Real Estate Highlights for 2H2019 released today.

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The report reviews the property market performance across the Klang Valley, Penang, Johor Bahru and Kota Kinabalu in the second half of last year.

Knight Frank Malaysia executive director of capital markets Allan Sim said the revived projects point to more clarity in government policies and are a boon to the country’s economy and construction sector with the growth in the manufacturing sector expecting to regain momentum moving into 2020 after slowing to 3.6% in 3Q2019 against 4.3% in 2Q2019.

The report noted that impactful on-going projects and initiatives such as the Digital Free Trade Zone (DFTZ), the Regional E-commerce and Logistics Hub at KLIA Aeropolis, the ECRL and the West-Coast Expressway (WCE) have also contributed to Malaysia’s readiness as a regional logistics hub while the National Budget 2020 also supports the logistics sector with the allocation of RM50 million for the repair and maintenance of roads leading to Port Klang.

Complemented by the increasing global e-commerce trade and consumer spending, logistics services are poised for growth and this will translate to higher demand for logistics and warehousing space, it said.

“We foresee Selangor and Johor garnering more interests from manufacturers and investors alike. Industrial players have a preference for the Shah Alam-Bukit Jelutong locale owing to its strategic positioning with good accessibility and connectivity. However, due to scarcity of sizeable land and high land cost, we observed an overspill to other areas.

“The on-going West Coast Expressway (WCE) with an interchange at Banting to be completed by early 2021 has opened up new opportunities for the locality, attracting the attention of major logistics and industrial players. Nestle’s distribution centre being Phase 1 of Axis Mega Distribution Centre and the upcoming development of The COMPASS @ Kota Seri Langat are both located here,” Sim explained.

Meanwhile, the report also highlighted that in 2019, Penang was the top recipient of foreign direct investment (FDI) inflow into Malaysia where it garnered RM13.2 billion in total approved manufacturing investments (RM12 billion FDI and RM1.2 billion domestic investments) from 113 projects in the first nine months of 2019, surpassing the RM5.78 billion achieved for the entire year in 2018.

“This is a tremendous boost to the state and augurs well for the short and medium-term growth of the sector. The outlook for 2020 is very positive. In tandem with robust performance of the manufacturing sector and the e-commerce platform, demand for logistics and warehousing facilities is set to grow in the coming year too,” said Knight Frank resident director Tay Tam.

Down south in Johor, the Iskandar Regional Development Authority (IRDA) had said the manufacturing sector was leading the numbers among the sectors and contributed 24% to the total cumulative investment for the region as of June 2019.

Knight Frank Johor branch head Debbie Choy has observed significant industrial transactions in the Port of Tanjung Pelepas (PTP) and Nusajaya Tech Park, which is proof that these areas are popular among investors and industrialists due to their established facilities and infrastructure.  

“We are also pleased to share that Knight Frank successfully facilitated the concluded deal of the Specialized Technology Resource (Malaysia) Sdn Bhd’s factory in PTP. The outlook for the industrial market is one of optimism with 2019 witnessing the listings of two Johor-based industrial players, namely AME Elite Consortium and Spring Art Holdings Sdn Bhd, in Bursa Malaysia. This is a positive sign that industrial players in the state have the potential to grow further in future,” she added.

Selangor, Penang and Johor are expected to be the forerunner for the industrial sector in 2020 as the country’s industrial sector remains promising, supported by various initiatives as announced in Budget 2020.