E&E, logistics and healthcare drive KL warehouse demand as government pushes industrial growth

• In H2 2024, the majority of tenants occupying warehouse spaces in Greater Kuala Lumpur are primarily from the electronics and electrical (E&E), logistics and healthcare sectors.
• The government is stimulating demand through incentives, as outlined in Budget 2025. These initiatives are expected to drive demand for high-quality logistics ecosystem facilities and services.

Three new warehouses boost KL supply, pushing vacancy to 4.8% in late 2024

• Three warehouses, Axis Mega Distribution Centre Phase 2, ALP Bukit Raja Omega and E-Metro Logistics Park Metrohub 1, were completed in H2 2024, contributing a total of around 2,831,000 sq ft of warehouse space to the market.
• The vacancy rate increased to 4.8% in Q4 2024 from 3.3% in Q2 2024, mainly due to new project completions. E-Metro Logistics Park Metrohub 1, the latest addition, has 50% occupancy, while ALP Bukit Raja Omega stands at 33% occupancy.

KL warehouse rents dip as modern facilities gain edge; CapitaLand’s MYR 180M acquisition highlights market shift

• Rents fell 2% in the quarter compared to Q2 2024. Larger deals led to negotiated discounts, while older assets lost appeal, requiring rent cuts to stay competitive. This reflects changing preferences in industrial real estate and challenges for aging properties.
• Capital values rose slightly due to tenant preference for newer, modern warehouses. However, the inclusion of many older warehouses in our assessment basket has moderated the overall increase in capital values.

Outlook: Warehouse upgrades and REIT shifts signal industrial real estate’s rising appeal

• 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.
• Considering the sector’s resilience, 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.