Logistics demand sees further slowdown in growth

• Warehouse demand saw a further slowdown in growth in H1 2024 as manufacturers maintained a cautious approach towards expanding storage space amidst increasing costs.
• In H1 2024, warehouse demand continued to stem from the 3PL, pharma/medical devices, FMCG, automotive and cold-storage subsectors. The market also saw growing demand for ESG-compliant warehouses, as this remains a hot topic in corporate strategies.

Vacancy increases amidst strong supply pipeline

• Two warehouses were completed in H1 2024, E-Metro Logistics Park Metrohub 2 and Atrium Shah Alam 4, contributing 800,000 sq ft and 338,417 sq ft, respectively, of warehouse space to the market.
• Overall vacancy rate increased to 3.3% (H2 2023: 1.5%). This increase comes amidst slower growth in net absorption as occupiers take a cautious approach to expansion amidst increasing costs.

Rents grow due to improving quality of stock

• International players continued to expand into the Malaysian market amidst the ongoing trend of supply-chain diversification with the China Plus One strategy.
• Overall rents grew by 1.7% in the quarter as the market saw some high-quality stock coming online, thus driving rents up slightly.

Outlook: Logistics market to see AEI trend in the future

• Asset enhancement initiatives (AEI) to upgrade warehouse facilities will remain a key trend as investors look to maintain asset performance amid increasing tenant requirements for certain technical specifications and ESG compliance.
• Retail- and office-focused REITs are likely to continue looking to dispose some of their commercial assets in favour of increased exposure to logistics and industrial assets, considering the sector’s resilience.