Friday, August 3, 2012

M'sian developers turning to industrial property

Business Times: Thu, Aug 02

INDUSTRIAL real estate in Malaysia's bigger cities is enjoying a resurgence of sorts with developers turning their attention to a segment that is yielding higher returns amid softening demand for high-end properties.

At the same time, owing to a shortage of industrial land, prices and rentals have also increased significantly, said CH Williams Talhar & Wong managing director Foo Gee Jen.

In the Klang Valley, rents have risen to RM1.60 (S$0.64) to RM2 per sq ft from RM1.20 five years ago. Closer to the Klang West Port area, they have doubled to RM1.40-1.60 psf from 60-80 sen psf.

Prices have also doubled, in popular places such as Glenmarie (near the previous Subang airport) going for RM100 psf. The same scenario is taking place in Penang and Johor Baru, driven by growing demand for industrial space from small to medium sized enterprises, mainly driven by sectors such as oil and gas, electrical and logistics.

"Some developers have switched from housing to industrial buildings and are picking up plots of land in Sungei Besi and Semenyih (in Selangor) for this purpose," Mr Foo said, pointing to companies such as Ireka Corporation, Paramount Group, Mah Sing Group and Suntrack Development.

The trend has been spurred by the lack of industrial land development over the years as developers focused on high-end residential and commercial projects which gave fatter margins, so much so that state development corporations which used to spearhead the former segment, also jumped onto the latter.

Yet another factor has been the rezoning of industrial land to residential. In some places, residential areas began to "creep up" to industrial zones, resulting in the authorities reclassifying the latter as limited commercial zones and raising the value of the land. The factories were asked to move further afield.

This includes a large portion of Section 13 in Petaling Jaya. Previously zoned as light industrial, numerous lots have been successfully converted to mixed developments. Similarly, the Mah Sing Group has grand designs for a huge RM3.2 billion mixed project on a 20-acre site in PJ, formerly occupied by the Matsushita factory.

This has put more pressure on industrial lots.

Pacific Alliance Realty principal Kayte Teh sees warehousing as an in-demand segment. She is still on the look-out for a suitable 80,000 to 100,000 sq ft space in the Klang Valley for her consumer goods client.

Also popular according to her, are one-and-a-half storey link factories of 2,000 to 3,000 sq ft because there isn't an oversupply. However, the rental market for the newer type semi-D factories is a bit soft because a number of small time developers jumped on the bandwagon a few years back when they perceived the initial response to be good.

"The new industrial developments are not moving so fast, and there, it's a tenant's market. But the mature places - Sunway Industrial area and Glenmarie for example - are 90-100 per cent full and if there is any available space, quickly taken up." Prices for these lots have also rocketed over the past few years, she said, shooting up from RM300,000 plus to about RM1.5 million.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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