Klang Valley Industrial Market Outlook For 1st Half Of 2022

The largest free trade deal in the world, the Regional Comprehensive Economic Partnership (RCEP), which went into effect for Malaysia on March 18, 2022, bodes well for the nation’s economic development. In the ASEAN region, Malaysia is a significant player in the manufacturing, information and communication technology, and commodities sectors (oil and palm oil). The new bloc’s trade and commerce strategy alignment will improve Malaysia’s growth prospects over the next three to five years. The COVID-19 pandemic has changed the retail landscape due to changes in consumer shopping behaviour, some of which are permanent, and this has caused the e-commerce industry to flourish in recent years.

The increase in e-commerce penetration, which increased the need for more storage space to accommodate the rise in last-mile deliveries, as well as the structural move towards omnichannel retailing, have all contributed to the country’s industrial market’s steady expansion in recent years. The recent economic momentum will continue into the second half of 2022 and beyond, with forces pushed by the RCEP, automation, and the ESG agenda having a significant impact on new growth sectors.

Multinational corporations, particularly those from Europe and the United States, are expanding and building new factories throughout the ASEAN region. The diversity and reconfiguration of global supply chains are projected to benefit Malaysia, one of the hotspots, as major MNCs act to reduce rising transportation costs and logistical problems.

Due to the current undersupply of high-quality stock, a rising number of institutional investors and real estate investment trusts are pursuing industrial and logistics real estate, which continues to experience record demand. Rent is on the rise, and prices are still attractive, as evidenced by the brisk investment activity. With probable cap rate compression, we expect modifications to yield estimates. Following the country’s transition to the endemic phase on 1 April 2022, Malaysia’s GDP is anticipated to keep growing going into 2H2022. The OPR increase from 1.75% to 2.00% on May 11, 2022, as well as additional possible increases later in the year amid mounting domestic and international inflationary pressures and ongoing geopolitical tensions, however, might halt the pace for growth.

[Source: Knight frank Malaysia (https://content.knightfrank.com/research/179/documents/en/malaysia-real-estate-highlights-1h-2022-9222.pdf)]

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