APPD Market Report Article
Kuala LumpurFebruary 28, 2023
Yulia Nikulicheva, Head of Research, Malaysia
Demand to remain supported by expanding production volumes
- Warehouse demand remains on its growth trajectory as manufacturers continue to expand storage space in response to the expanding production volumes. However, manufacturers remain cautious about forecast production volumes as rising production costs and existing supply chain constraints could negatively impact the production outlook.
- In the quarter, warehouse demand from 3PL, FMCG, e-commerce and pharmaceutical sectors grew further. There was also greater activity by cold-chain logistics companies, based on the increasing number of enquiries received.
Vacancy rate improves as the market remains hot
- One warehouse, LYL’s U10 Phase 2 (Lots 1, 2 & 3), completed in 2H22, adding 53,599 sqm to the market. Upon completion, the warehouse was occupied by several logistics companies, and the anchor tenant was BEST Express, which occupied approximately 23,225 sqm.
- The overall vacancy rate decreased to 1.6%, from 2.4% in 2Q22. This is attributed to the expansion of operations of players in the 3PL sector, with many of them expanding into the newly completed LYL U10 Phase 2. Concurrently, supply constraints remain with only three warehouse developments completed in 2022, two of which are owner-occupied while the third is multi-tenanted with full occupancy.
Investor confidence remains strong in a resilient market
- International players continue to expand into the Malaysian market. An example of this is J&T Express, an Indonesian 3PL player that recently acquired 30 acres of land in Bandar Rimbayu, Selangor, from IJM Land, to develop its own warehouse.
- Overall rents increased further, mainly due to warehouses enjoying high occupancy rates and raising their rents. The completion of new buildings with high specifications in good locations also contributed to this increase. However, this was balanced out by some landlords of older warehouses who have reduced rents slightly to retain long-term tenants.
Outlook: Investments to be driven by both local and foreign investors
- Incoming Prime warehouse supply is likely to be demand-driven, with most incoming supply anticipated to be fully pre-leased or experiencing high take-up rates prior to completion. Demand for existing warehouses will likely remain strong throughout 2023, driven by the ongoing expansion of 3PL and manufacturing companies.
- More warehouse entries are anticipated to be announced in the ensuing years as local and foreign investment interest continues to remain high, reflecting the resiliency of the warehouse sector.