APPD Market Report Article
Greater Kuala LumpurFebruary 28, 2022
E-Commerce, 3PL and manufacturing sectors continue to drive demand
- From September, most Malaysian states eased movement restrictions as national COVID-19 vaccination rates improved, allowing most manufacturing sectors to return to business after shutting down since June.
- Overall demand for warehouse space was strong, driven by the increase in manufacturing activities to keep up with rising demand for manufactured goods across Asia. E-Commerce and 3PL players continue to boost logistics warehouse demand as well.
Pre-leased completions and operation expansions reduce vacancy
- D Project Malaysia 1 (Phase 2) located in Shah Alam was completed in 2H21, adding 160,000 sq ft to the market. Upon completion, the warehouse was fully occupied by a data and records management company, and a food logistics company.
- Overall vacancy rate decreased due to operation expansions from the 3PL and e-commerce sectors; players such as CEVA and Lazada took up space and expanded their existing space in Cainiao e-commerce Hub and DFTZ, respectively.
Overall rents continue a growth trend
- Overall rents increased slightly as warehouses that enjoy high occupancy rates and newly completed warehouses with high specifications in good locations were observed increasing rents. However, landlords inclined to retain long-term tenants have opted to maintain their rents, instead.
- The logistics sector continues to attract investments. International investors were observed entering the Malaysian market, mainly in the form of JV. Some announcements made in 2H21 include Logos’s JV with Sime Darby for the development of Bandar Bukit Raja 2. Taiwan Logistics Developer, ALP is currently looking for local investment partners for the development of ALP Bukit Raja OMega.
Outlook: Capital values likely to grow, reflecting yield compression
- Prime warehouse supply coming in will be demand-driven, with all incoming supply in 2022 anticipated to be pre-leased prior to completion. Demand for existing warehouses will remain high throughout the year, driven by the continuous expansion of e-commerce, 3PL and manufacturing companies.
- More investors are anticipated to enter the market as the logistics sector continues to be the most resilient during the pandemic. Capital values of prime warehouses are expected to increase due to strong demand for warehouses.