Knight Frank highlights rising hope in commercial property investments

By Poovenraj Kanagaraj

Investors are adopting the “wait and see” approach as the local and global economies screeched to a halt amid the Covid-19 pandemic, according to Knight Frank Malaysia’s Regional Commercial Real Estate Investment Sentiment Survey (RCREISS) 2020 for Penang, Johor and Sabah.

The commercial property market in three states are expected to remain in the doldrums as weak sentiments prevail for the remainder of the year.

“Undoubtedly, the industrial sub-sector will continue to be a beacon of Penang’s economy. We also see rising interest in the office sector while a wave of branded residences emerging with hotel services is also a bright sector for Penang. Amid the doom and gloom, there are still opportunities to explore,” says Mark Saw, executive director, Knight Frank Penang.

Knight Frank Penang sees rising interest due to its relatively healthy level of supply and commendable occupancy rate and with limited incoming supply, the sector became the bullseye for some investors and developers.

However, the Penang office wards of some pullback to the co-working segment in the immediate term preceding the lifting of the movement control order (MCO). This is due to the reduced desire for members to interact face to face in one location.

“Post Covid-19, co-working space with its unique selling points (USPs) offering flexibility, hassle-free and low set-up cost is expected to continue attracting small companies and self-employed individuals,” Saw said.

He also foresees the upcoming trend of branded residences by highlighting that Marriott has made their first branded residences footprint in Penang. Another notable incoming branded residence development on the island is the Angsana by Banyan Tree at Teluk Bahang.

“By selling a brand for a residence at a premium and having a hotel support its management and services, developers have found a way to reduce the risk of developing hotels by selling international branded residences to savvy and well-heeled investors. We expect to see more international hotel brands offering luxury homes as the trophy asset to the wealthy,” he said.

As for the Johor market, Debbie Choy, branch head of Knight Frank Johor says, “We anticipate that REITs will resume their search for similar assets post-Covid-19 as demand continues to remain strong within certain localities. Knight Frank continues to receive active enquiries on industrial type opportunities.

“The outlook for the state’s logistic sub-sector remains upbeat supported by the presence of three seaports, namely Port of Tanjung Pelepas, Johor Port and Tanjung Langsat Port as well as the Senai International Airport.”

According to Knight Frank, the healthcare sub-sector in Johor has been growing steadily with the completions and expansions of more private medical facilities.

Last year saw the completions of three hospitals, namely Columbia Asia Tebrau Hospital, KPJ Bandar Dato’ Onn and KPJ Batu Pahat while KPJ Puteri Specialist and KPJ Kluang are currently under expansion.

Choy highlighted that the state’s proximity to Singapore creates demand from foreign patients due to the favourable currency exchange and quality of medical services offered. The outlook for the healthcare sub-sectors appears to be promising as over 50 percent of survey respondents foresee higher yield and returns this year compared to previous year.

Alexel Chen, executive director, Knight Frank Sabah on the other hand says the pandemic has disrupted the thriving tourism industry and its related services, when the state government announced the suspension of all direct flights from China and South Korea.

“The implementation of the MCO and travel bans subsequent to that coupled with the plunge in crude oil price and lower CPO price, further dampen the market sentiment,” he said.

“Government policies to encourage inflow of Foreign Direct Investment (FDI) into the state through better financial incentives, well-established infrastructure, and desirable administrative processes and regulatory environment, will collectively bolster the footing and positioning of the industry to better withstand future adversity and challenges,” Chen added.



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