By Sharina Ahmad
The industrial sub-sector is expected to remain resilient despite the uncertainties in the property sector.
According to findings from KGV International Property Consultants (M) Sdn Bhd’s recent market survey on “Behavioural patterns of industrial property investors post-MCO” conducted in June, the industrial business environment is expected to recover in less than six months to two years.
“Although we have already seen some recovery now in the third quarter, it will take awhile before we get back to normal because the second quarter has taken a beating with the Covid-19 and the lockdown.
Rahim & Co International Sdn Bhd CEO Siva Shanker said “The entire property market has gone soft, even for every property sub-sector, things are not as good as they should be.”
Hence, with some semblance of normalcy has returned to the market as to date, he said the industrial market has held very steady.
“That is mainly due to the simple factor of supply and demand. There’s a lot of speculation in other sectors, like for residential as there’s a bit of an overhang, oversupply of office space, but industrial is close to equilibrium as it can possibly get, which means supply and demand is close to meeting.
“Of course, it is physically and economically impossible to meet. But the industrial sector has fewer speculation especially in the industrial sector building,” Siva told Property Advisor.
KGV International’s survey said a majority of the respondents in the survey chose detached (41%) units followed by 30.5% who liked semi-D factories as their preferred industrial property type.
Meanwhile, most of the respondents (62%) preferred 1½-storey factory units, a trend which is already reflected in the current market supply.
The survey also stated that 1½-storey factory units are the most popular.
“This is consistent with what we see in most of the industrial schemes where most factory units offer a ground-level operation or warehouse space at the back and a double-storey office annexe at the front,” it said.
According to Siva, the only uncertainty is in the terrace or semi-D factories that have been built by developers to sell, which may be bought on speculation.
These units comprise terraces and semi-Ds that are generally 100,000 sq ft in size and below.
“People buying, hoping to rent them out or hoping to flip them after completion. That sector somewhat has more supply than the demand.”
Due to the growth in the e-commerce and logistics warehousing sectors, Siva said bigger space for industrial sub-sector units are on-demand currently.
“So to a large extent, the industrial sector has done well and because of the Covid-19 and the lockdown, the rise in online marketing has increased the demand for warehousing and storage. The space for logistics has grown exponentially!”
He said the industrial market is a great benefactor for e-commerce and logistics warehousing.
“So what used to be demand for 20,000-50,000 square feet of space has now grown into demand for hundreds of thousands square feet of space.
“And there is very little supply, it is not fluid at all. If you want something for 300,000 square feet, you usually can’t find anything and it will take six months to a year to actually build one for you.”
In general, he said most of the owners who own a bigger industrial space will not give up their tenancy so easily.
“And moving is not easy for big things, especially for manufacturing. If you’re doing manufacturing, you got millions of dollars worth of machinery cluttered there.”
According to CBRE | WTW, Malaysia has the second-highest e-commerce penetration rate in the region.
“The e-commerce base will certainly expand over time, in tandem with the increasing adoption of IT in everyday life and growing technological knowledge among Malaysians.
“These drivers are expected to remain as the integral support for domestic logistics activities, with some of them, such as e-commerce and third-party logistics (3PLs), looking very promising. Parallel to that, the industrial property market has seen the rapid emergence of warehouses in recent years,” it said.
This article was written by Sharina Ahmad of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.