Kedah records highest foreign investment activity in industrial sector in 1Q2024, says Knight Frank

• “International orders are coming in fast. And manufacturers could not get to their sites in Penang on time. Hence, they head to the nearest state, that is Kedah,” explained Knight Frank Malaysia executive director of land and industrial solutions Allan Sim, adding that the Kedah Express Construction Permit (E10) initiative has significantly expedited the process for investors. 

KUALA LUMPUR (July 17): Kedah, particularly in Kulim, has witnessed the highest influx of foreign investments for the manufacturing sub-sector in the country in the first quarter of this year (1Q2024), according to Knight Frank Malaysia executive director of land and industrial solutions Allan Sim.

In his presentation on the overview of the industrial sector in conjunction with the release of Knight Frank’s The Real Estate Highlights 1st Half of 2024 report on Wednesday, Sim highlighted that Kedah recorded a significant RM30.38 billion worth of foreign investment activities in 1Q2024. This is followed by Klang Valley (RM3.27 billion), Johor (RM2.33 billion), Penang (RM1.82 billion) and Sarawak (RM1.3 billion). 

“International orders are coming in fast. And manufacturers could not get to their sites in Penang on time. Hence, they head to the nearest state, that is Kedah,” explained Sim, adding that the Kedah Express Construction Permit (E10) initiative has significantly expedited the process for investors. 

According to the report, approved foreign investments in the industrial sector saw an estimated 203% surge year-on-year (y-o-y) to RM38.15 billion for 1Q2024. Domestic investments on the other hand, recorded an estimated 58% increase y-o-y to RM4.79 billion.

The report also indicated that major investments in data centres, notably by Google in Klang Valley, underscore the sector's growth.

In Johor, rapid growth in the data centre market is driven by its proximity to Singapore as well as the launch of the Johor-Singapore Special Economic Zone in January 2024.

Meanwhile, other states such as Penang, Sabah and Sarawak continue to see growth in investment value in the industrial sector.

Additionally, there have been an increase in transaction volume and value for the sector in Klang Valley, Penang, Johor, Sabah and Sarawak in the first quarter, with detached factories in the Klang Valley seeing a significant rise of about 44% to an estimated RM2 billion for 1Q2024, according to Sim.

Overall, Malaysia’s industrial production index remained stable in 1Q2024 at 130.4 points — a 3.3% annual growth compared to 1Q2023 (2.9%). All sub sectors recorded growth, led by electricity (8.9%), mining (5.9%) and manufacturing (2.1%), according to the report. 

Trade performance in the country continued its upward trajectory in 1Q2024, growing by 7.1% to RM690.6 billion, with a trade surplus of RM34.22 billion, reflecting global trade recovery.

Exports also increased by 2.2% to RM362.4 billion compared to 1Q2023, driven by higher exports of manufactured and mining goods.

“The manufacturing sector is forecast to grow by 3.5% in 2024, supported by a rebound in export-oriented industries and sustained growth in the domestic-oriented cluster. The electrical and electronics (E&E) sector is expected to recover in 2024, led by an upswing in the global technology cycle,” Sim said.

He added: “The ‘flight-to-quality’ and ‘flight-to-sustainability’ trends are expected to shape the future development of logistics space in Klang Valley. With higher development costs associated with prime logistics space, market rents are anticipated to experience a marginal increase in the short term.”

Meanwhile, the report provided other highlights from other real estate sectors such as the office sector, which is seeing growing demand for co-working and flexible office spaces, reflecting changing work patterns and preferences.

The retail industry is showing positive momentum. Trends indicate a surge in digital integration and experiential offerings, with retailers adapting to changing consumer preferences and enhancing in-store technologies to boost engagement and sales.

As for the hospitality sector, the luxury hotel segment is set for significant growth, with new developments dominated by international brands. Rising average occupancy rates (AOR) and average daily rates (ADR) indicate a robust recovery in the hospitality sector.

For the residential market, the Klang Valley saw 3,413 units sold for RM2.8 billion, marking an increase of 19.2% in volume and 19.3% in value, which indicates a trend towards luxury high-rise residential units.

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