Knight Frank Malaysia anticipates a relatively stable and prudently optimistic environment in 2024. What factors contributed to the resilient performance of the economy and real estate market in 2023, and what specific indicators suggest a stable and cautiously optimistic outlook for the commercial real estate market in 2024?
The realtor has released its latest publication, Malaysia Commercial Real Estate Investment Sentiment Survey (CREISS) for 2024 to answer some of these pertinent questions. The findings include a close look at key players’ sentiments on market performance, sub-sector investment activity and factors impacting the market.
Last year, the property market in Malaysia continued to strengthen as evident during the first nine months of 2023, witnessing a total of 293,095 transactions amounting to RM142.5 billion. The transactions exhibited stability in volume, with year-on-year increase of 8.8% in value (9M2022: 293,115 transactions worth RM131.0 billion)
Factors affecting commercial real estate investment – 68% of the respondents believe that foreign direct investments (FDI) will be more favourable due to better economic conditions. FDI in Malaysia is dominated by the manufacturing sector and is expected to continue attracting manufacturing investment to the country due to the availability of an ecosystem and resources. 62% believed that the Business Confidence Index (BCI) would be positive, attributed to a stable economic environment and anticipated future developments. As for Budget 2024 and considering the government initiatives and policies, 60% of the respondents find it neutral towards the commercial property market.
Amidst global challenges, a majority expresses optimism about Malaysia’s economic performance, digital evolution, and the real estate market, driven by factors such as a resilient labour market and positive consumer sentiments. The favourable outlook on political stability further contributes to enhanced investor confidence on both domestic and international fronts.
According to Amy Wong, Executive Director of Research & Consultancy at Knight Frank Malaysia, she noted that respondents predict a positive increase in investments into the retail, healthcare, and educational/institutional sub-sectors in 2024. However, minimal interest is observed in the office and industrial/logistics sub-sectors, while the hotel/leisure sector maintains a trend similar to that of 2023. A look into respondents’ views on the investment landscape from 2024 to 2026 reveals a keen interest in serviced residences/hotels, particularly in established areas like Klang Valley, Penang, and
Sabah, driven by increased tourism and a resurgence in the hotel industry post-pandemic.
Industrial/business parks, especially in regions like Klang Valley, Penang, and Johor, are attracting investors exploring opportunities in logistics and industrial hubs amidst the rise of the digital economy. Additionally, there’s a growing preference for alternative investments, with notable interest in sectors like co-living/student accommodation, co-working/flexible office spaces, and the data centre industry, reflecting evolving trends in work preferences and technological advancements.
The 2024 performance forecast reveals optimistic expectations for the industrial and logistics sectors, with 62% anticipating an increase in capital appreciation and 68% foreseeing a positive outlook on yields in the logistics sub-sector. While stability is predicted for office, retail, hotel/leisure, healthcare, and educational/institutional sub-sectors, concerns exist for the office
sub-sector due to potential decreases in capital value and yields of older assets, attributed to substantial supply impacting asset performances. Furthermore, positive projections for rental values in industrial/logistics properties and the hotel/leisure industry are highlighted, but challenges, such as potential decrease in office rents and occupancy rates in older buildings, are
noted, particularly in the face of significant incoming supply in the Klang Valley office market, as mentioned by Wong. Considering the resilient economic recovery and the looming geopolitical risks, the performance of the property market is expected to be moderate in 2024.
