Malaysia’s Logistics Rents To Trend Upward In Line With Regional Rise: Knight Frank

Malaysia showed an upward trajectory in logistics rents, which echoes the broader regional trend, indicating a positive outlook for the industry, according to Knight Frank’s Asia-Pacific Logistics Markets Report H2 2023.

Knight Frank Land & Industrial Solutions executive director Allan Sim said despite external headwinds and challenges, leasing activity for prime logistics warehouses particularly for Klang Valley, Johor Baharu and Penang remained resilient, with expected rents growth in 2024.

“The growth is attributed to tight availability of grade A warehouses and strong leasing demand for specific grade A warehouses. The year ahead could see rental growth due to price resistance from landlord due to higher construction and financing costs.

“As we witness a measured increase in rents, our emphasis remains on fostering innovation and sustainability in logistics spaces to meet the evolving demands of occupiers,” he said in a statement today (Feb 15).

Sim said Kuala Lumpur is holding steady, showcasing stability in the face of global economic fluctuations.

“The local market’s response to these changes underscores the adaptability and forward-thinking nature of our logistics industry.”

In addition, he said the expected global recovery in the semi-conductor industry next year will increase the demand for the space particularly in Penang, Kulim, Malacca, and Selangor.

“There are more higher-end grade A warehouses scheduled to be completed in 2024 and landlords are increasingly reluctant to compromise on building specification for a lower rental rates.

“We shall also seeing more landlords to undertake redevelopment on older factory and warehouse to a modern and higher specification warehouses.”

However, he said the performance of the rental will subject on the performance on foreign direct investment (FDI) and domestic direct investment (DDI) in the coming year.

“As we navigate the path ahead, the outlook for logistics in Malaysia remains optimistic, bolstered by our resilience and strategic positioning in the Asia-Pacific landscape,” added Sim.

Meanwhile, the leading global real estate adviser said the report found that prime logistics rents in the region continued to grow 6.2% year-on-year (YoY) in the second half of 2023 (H2 2023), spurred by an acceleration in rental growth in Manila.

“However, the report shows a slowdown in short-term momentum, with a 1.5% increase in half-yearly rental growth, compared with 4.6% for the first half of 2023 (H1 2023),” it said.

Leading global real estate adviser said the report found that out of 17 cities tracked by the index, 13 cities recorded stable or increased rents in H2 2023, compared with 16 in the prior six months.

“Rental growth was led by Manila, which rose at 39.3% annually and 7.3% from 6 months ago. The rapid expansion of the e-commerce sector fueled the rise.

“However, Beijing and Shanghai registered notable rental declines as a sluggish economy weighed on demand amid the substantial supply pipeline,” it said.

Knight Frank Occupier Strategy and Solutions global head Tim Armstrong said as logistics occupiers continue to dial back on expansionary ambitions, it is becoming apparent that the supply-demand imbalance that had fueled the region’s steep rental growth is waning.

“However, the Red Sea conflict is a reminder that global supply chains remain vulnerable to disruptions. The region’s ample development pipeline is an opportunity for occupiers to review their logistics footprint.

“Leasing activity is expected to turn more selective with take-up from occupiers seeking strategically located prime logistics spaces that are automated and compliant with sustainability standards,” Amstrong said.

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