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Knight Frank: Mature industrial areas to see more redevelopment activity

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In many advanced countries, the term redevelopment is a common development plan. The reason is a simple one. While it’s possible to build ever further away but nothing beats the convenience of having the new development within the mature areas. This is where older developments which are no longer needed are redeveloped into something in demand currently. Old factories may make way for logistics hub for example. It seems that this is also happening in Malaysia too. Media release on Knight Frank Malaysia’s views as below:

Press Release: Mature industrial areas to see more redevelopment activity 

13 July 2020, Malaysia – Knight Frank Malaysia launches the latest research report, Real Estate Highlights 1st Half of 2020 today which reviews the property market performance across Klang Valley, Penang, Johor Bahru and Kota Kinabalu. 

Earlier in the year on 18 March 2020, to contain the escalating numbers of infected cases amid the COVID-19 outbreak, the country was placed under the Movement Control Order (MCO). As the country restarts its economy under the recovery MCO phase (10 June till 31 August 2020), more economic sectors and businesses are gradually resuming operations with stringent standard operating procedures (SOPs) in place. 

In the industrial property segment, stakeholders are expected to practise more caution in formulating their plans as they navigate through this difficult operating environment. 

Allan Sim, Executive Director of Capital Markets, Knight Frank Malaysia, said, “For larger industrial park projects within the Greater Klang Valley, we foresee developers relooking at plans involving speculative builds of smaller industrial products. More developers are expected to respond fluidly to current market demand, i.e. by securing interests of manufacturers / operators to engage in larger build- to-suit products.” 

“This strategy will bode well with current market sentiment and trend as we have been receiving more enquiries from industrialists who are keen to embark on such arrangements, largely spurred by attractive tax incentives for overseas manufacturers under the government’s recently announced short- term Economic Recovery Plan (PENJANA)”, added Sim. 

On a separate front, mature industrial parks in the likes of Shah Alam pose a rather distinct narrative. Sim commented, “Shah Alam is entering into an early transformation and redevelopment phase from a manufacturing centric location to a modern urban logistics hub. The scarcity of industrial land within the mature and well-connected locale coupled with increasing demand for higher specification logistics facilities have propelled many landowners to capitalise on the trend to redevelop their dated industrial premises.” 

Sim opined, “Despite rising land prices in Shah Alam, there are still factors incentivising logistics players to look into the locality. These include Shah Alam’s central location providing opportunities for more delivery runs per day, as well as the advent of construction going into multi-storey to balance the real estate costs”. 

“Even as the economy is going through the aftermath of the pandemic, we are seeing more redevelopment planning activity of industrial plots within Shah Alam. Unlike many traditional businesses, the end-users of these redevelopments are mainly e-commerce and logistics players who are beneficiaries of increased online shopping traffics during the MCO period. Post-MCO, online trading will be central for more businesses. Notable upcoming redevelopment projects within Shah Alam include the former site of Advance Synergy by Mapletree and the 4.37-acre Xin Hwa site, both at Section 22; and the former FEC Cable site at Section 16. To date, the largest redevelopment site in the locale encompasses the 71-acre former Chemical Company of Malaysia Bhd (CCM) facility”, added Sim

News Release 

Mark Saw, Executive Director of Knight Frank Penang, said, “Meanwhile, Penang continues to see positive demand for industrial land at mature areas such as Batu Kawan Industrial Park and Penang Science Park. In the short to medium term, we foresee further expansion southwards of mainland Penang and growing interest in the northern part of the state, in and around Seberang Perai Utara (SPU) with focus on light industrial developments.” 

Outlook 

In the face of the COVID-19 pandemic, the industrial real estate market remains resilient. The much lauded efforts by the government in providing generous tax incentives for foreign manufacturers under the recently unveiled PENJANA Plan, will help to position Malaysia as a strong contender to attract more relocations and shoring of overseas manufacturing operations to Malaysia. This is timely given the on-going major restructuring of global supply chains arising from the aftermath of the pandemic, as well as the on-going US-China trade war. 

“Moving forward, the outlook for Malaysia’s industrial property market is looking favourable as we expect to see more active enquiries led by manufacturers looking to take advantage of the tax incentives as well as international e-commerce operators riding on the surge of demand for their services amid consumers’ shift towards digital channels and online shopping. We also foresee more international e- commerce operators considering Malaysia as an important regional distribution hub within their network”, Sim concluded.

— end of press release —

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