This article first appeared in The Edge Malaysia Weekly on December 27, 2021 - January 2, 2022

THE Malaysian property market — which declined sharply last year in both volume and value of transactions, owing to the Covid-19 pandemic — saw a gradual recovery in 2021, with a higher number of transactions recorded.

The number of deals in industrial, agricultural, commercial and development land improved from 2020, with land-banking activities and interest in industrial assets taking centre stage.

“With the high degree of vaccination and the opening up of the economy, we saw a gradual recovery in terms of positive growth in sales, owing to pent-up demand and a shift in space requirements brought about by the pandemic,” Laurelcap Sdn Bhd executive director Stanley Toh tells The Edge.

The recovery, he adds, was also supported by the government’s fiscal and monetary policies such as the Home Ownership Campaign and low interest rates.

“[There was no end to] land-banking activity this year. Despite the prevailing economic concerns, the residential market was also still focused on serving local demand,” says CBRE | WTW group managing director Foo Gee Jen.

He observes that this was not confined to the Klang Valley as land was being acquired for existing and new developments in Penang and Johor.

“A significant player in the market is Scientex Bhd,” he says, adding that it ventured out of Melaka and its home base in Johor. The packaging manufacturer and property developer has been increasing its investment in land near its existing developments and in sites with good accessibility.

“This is in line with its goal to build more than 50,000 affordable homes by 2028,” Foo points out.

Siva Shanker, CEO of real estate agency at Rahim & Co, concurs. “It is abundantly clear that developers are on the hunt for good development sites in locations on the fringe of the city and near-by suburbs. In each property cycle, at the first sign of an impending market recovery, the pace for land banking will escalate, as developers go on the hunt for good properties that they can develop in the next couple of years.”

He is of the view that the industrial market is the clear winner in this period, as it was hardly affected by the pandemic. “Rather, the situation has simply strengthened this sector.”

Another segment believed to be experiencing a pickup is the hospitality industry. Siva says there is increased interest in hospitality assets as investors and hospitality players are banking on a strong rebound in tourism with Covid-19 being contained and more tourism subsectors opening up.

As in previous years, The Edge reached out to real estate experts to provide their list of top 10 property deals in 2021. Apart from Toh, Foo and Siva, this year’s participants comprised ExaStrata Solutions Sdn Bhd CEO and chief real estate consultant Adzman Shah Mohd Ariffin, Knight Frank Malaysia managing director Sarkunan Subramaniam and Savills Malaysia deputy managing director and head of capital markets Nabeel Hussain.

This year, the transaction that received all six property experts’ vote was the sale of Dutch Lady Milk Industries Bhd’s factory land in Section 13, Petaling Jaya, Selangor. The deal was brokered by CBRE | WTW.

The 9.93-acre site, a prominent landmark in PJ, was sold for RM200 million, or RM462.29 per sq ft (psf), to UEM Sunrise Bhd.

“We look forward to UEM Sunrise being the catalyst for Section 13’s urban regeneration,” Siva says. He adds that PJ continues to remain a premier residential and commercial satellite suburb of KL.

“The price is above market value for a large land area, especially when it has only about 38 years unexpired on the lease,” Adzman says when asked why he chose this deal.

Toh says the RM462.29 psf price tag is a “very encouraging benchmark”, adding that it shows confidence in the property market in PJ.

“Following on from the Kickapoo sale, this was another notable example of a major developer (UEM Sunrise) investing in the Section 13 special development zone,” says Nabeel.

It is worth noting that the 2.06-acre Sinalco and Kickapoo Joy Juice bottling factory — located directly across the road from the Dutch Lady parcel — was sold by Singapore-based National Aerated Water Co (KL) to GSD Land (M) Sdn Bhd for RM46 million, or RM514 psf.

Incidentally, the Kickapoo land sale also appears on Adzman’s and Nabeel’s list this year. “The transacted price was way above market value, especially when it had only about 39 years unexpired on the lease,” Adzman notes.

“This is the highest price on record in Section 13, PJ, at over RM514 psf,” Nabeel says of the deal executed by his agency.

Both UEM Sunrise and GSD are property developers that have purchased industrial land to redevelop into commercial assets, similar to what is happening in nearby parcels.

Another property deal that made it to five of the six property experts’ list this year is IGB Commercial Real Estate Investment Trust (IGB Commercial REIT).

The REIT, which was listed on Bursa Malaysia in September, comprises a portfolio of 10 office properties valued at RM3.16 billion. “This transaction is meaningful as it shows that there is still room for growth in the office market for a good class of office buildings with strong tenant covenants. We believe this will be a strong impetus for other asset owners to monetise their assets via the REIT route,” Siva says.

Foo describes the deal as “the largest transaction of the year”. Pointing out that while it is a related-party transaction (RPT), it was a “surprising initial public offering amid lacklustre market conditions due to the pandemic” and at a “compressed yield ranging between 3.5% and 5.5%”.

Conceding that the deal was an RPT, Nabeel says what makes it notable is its “profile (a significant office-only REIT) and the sponsor (a major Malaysian developer), which  already has a retail REIT (IGB REIT)”.

Toh also points to the transacted price of GTower to IGB Commercial REIT for RM739.8 million as well as that of Centrepoint North and Gardens North Tower for a combined RM578.6 million in April 2021. “These transactions, which were done at the height of the pandemic, marked the resilience of and confidence in an asset class that has been badly affected,” he says.

After executing two major land purchases in Melaka and Pulai, Johor, last year, Scientex continued its buying spree in 2021. Four of the six real estate agents placed Scientex on their list for this reason.

Foo notes that based on deals signed last year and completed this year in Johor and Melaka and purchases made in 2021, Scientex has bought 2,910 acres of land worth RM1.23 billion. Among the deals entered into this year are the purchase of 251 acres of agricultural land in Jenjarom, Selangor, for RM207.6 million from Seriamas Development Sdn Bhd; 960 acres of land in Tebrau, Johor, for RM518.1 million from S P Setia; and 343 acres of freehold agricultural land in North Seberang Perai for RM246.7 million from Sunrich Conquest Sdn Bhd and Titanium Greenview Sdn Bhd.

For Nabeel, Scientex stands out because of its “multiple acquisitions of land tracts throughout Malaysia for the development of affordable housing”.

Referring to Scientex’s acquisition in Jenjarom, Siva states that the South Klang Valley corridor continues to attract attention. “This transaction will further fuel the growth of this location.”

Over in KL, Sunway Bhd’s purchase of a 6.59-acre freehold site on Jalan Cochrane from Boustead Holdings Bhd for RM233.39 million was selected by Foo, Adzman and Siva for their 2021 list of top property deals.

Foo notes that the purchase was within a new growth centre in Cheras. “We can anticipate more land deals to occur in this new growth area.”

Adzman agrees that this location is in a growing commercial hub and near Sunway Velocity and Ikea. He expects these two developments to become a catalyst to further development and expansion within the area.

 “The good connectivity provided by the integrated MRT and LRT services as well as good linkage to major road networks further enhances the potential of the area.”

Siva remarks that it is “a strategic investment in pocket land on the fringe of the city. This location has attracted much attention over the past few years, driven by the strong growth of Tun Razak Exchange in KL and the implications of a brand-new financial centre there. It is a superb deal in a superb location”.

Even as UEM Sunrise has been divesting land, for example, in Iskandar Puteri and Mersing, Johor, it has also been adding to its land bank in 2021. Apart from the Dutch Lady site, UEM Sunrise had purchased 6.8 acres of land in Taman Connaught, Cheras, from Accolade Land Sdn Bhd for RM197 million, or RM660 psf.

“The chase for pockets of land continues unabated in the suburbs of KL as city centre sites lose their lustre mainly due to high land prices,” Siva says.   

In explaining his selection, Toh says the purchase of the land with approval for commercial development was a strategic move by UEM Sunrise to capitalise on the current poor economic situation. “It is also forward looking, as it will be able to see the benefits once the property market returns [to normal] post-pandemic recovery,” he adds.  

The number of transactions involving industrial land and assets continued to grow in 2021.

A significant industrial land transaction was the purchase of 62.62 acres in Senai Airport City Free Commercial Zone by Tiong Nam Logistics Holdings Bhd from Senai Airport City Sdn Bhd for RM136.38 million.

Tiong Nam plans to build a warehouse of one million sq ft for Germany’s Daimler AG, which is establishing its regional after-sales logistics centre and regional distribution hub in Malaysia. The centre will become part of the group’s global after-sales supply chain network and will serve as a distribution site for spare parts in Asia-Pacific. The facility, which is expected to be ready in 2024, will be operated by locally established Mercedes-Benz Parts Logistics Asia Pacific (Malaysia).

“The logistics market continues to soar despite the threat of Covid-19 and the doom and gloom it has brought to other sectors of the market. This will further strengthen Malaysia as a Southeast Asian logistics hub,” Siva opines.

In September, YTL Power International Bhd purchased 1,640 acres of land in Kulai Young Estate, Johor, for RM429 million. Three of the six experts placed the transaction among their top 10 deals.

“We like it because of the purchaser’s intention to develop the land into solar farms,” Siva says. He adds that it is a positive step towards reducing dependence on fossil fuels. Foo also likes the deal as it will “cater for more demand for green and sustainable power supply-solar plants”.

Meanwhile, Sarkunan, Toh and Nabeel have picked the joint venture (JV) between Sime Darby Property Bhd and Australia-based logistics specialist LOGOS Property Group Ltd as a top 2021 property deal. LOGOS has entered into a JV with Sime Darby Property (Capital Holdings) Pte Ltd under an industrial development fund collaboration that aims to initially raise US$200 million. Sime Darby has allocated 177 acres of industrial land in its Bandar Bukit Raja township in Shah Alam, Selangor, for the purpose of this JV.

Sarkunan says the deal to develop and invest in build-to-suit and lease or sell industrial assets, primarily for clients in the logistics sector, on the 177-acre plot stands out. He adds that the reason he chose this deal is because it is a “strategic move by Sime Darby to channel its land bank into this growing sector, partnering with an international player who has the logistics know-how and know-who”.

For Toh, the deal marks the significant impact the pandemic has had on the logistics sector as the surge in e-commerce owing to the various Movement Control Orders has boosted the need for warehousing space.

Just as it had in 2020, Axis REIT continued to buy more industrial assets this year. In March, the trust bought 20.75 acres of land in the Bukit Raja Selatan Industrial Area for RM120 million, which has a potential to be redeveloped into a warehouse; and a warehouse in the Pasir Gudang Industrial Area for RM75 million. In October, it purchased a warehouse logistics facility in Pasir Gudang, Johor, for RM32 million.

Foo says these purchases are indicative of a continued strong growth in logistics and warehousing, while Adzman points out that the Axis purchase in Bukit Raja, which works out to RM368 psf, is “record breaking during a challenging period”.

In March, glove giant Hartalega Holdings Bhd announced that it would be investing RM7 billion to build 16 new glove factories in Malaysia over the next 20 years. As part of the expansion, Hartalega bought a 250-acre parcel in Kedah for RM228.7 million.

“There is continuous demand (for land) in the rubber glove industry. About RM500 million worth of industrial land transactions were done last year by the main players in this industry,” Foo says.

Another major industrial land deal this year was the investment by Austria Technologie & Systemtechnik AG (AT&S), a global leader in the manufacturing of high-end printed circuit boards and integrated circuit substrates. It bought a 56.1-acre site in Kulim Hi-Tech Park in Kedah to house its high-tech microelectronics factory. There was also the purchase by China’s Zhejiang Guorong Digital Economy Group Ltd of 168 acres of industrial land in Batang Padang, Perak, from Ageson Bhd for RM278.78 million.

The sale of Wisma KFC in KL — which changed hands twice in three years — did not go unnoticed. In 2018, Singapore’s Royal Group bought Wisma KFC from the Employees Provident Fund for RM116.5 million. Royal Group had planned to renovate the office building and transform it into a luxury hotel. This year, Royal Group sold the asset to Hap Seng Consolidated Bhd for RM190 million even before the opening of the hotel. It is learnt that Hap Seng will stick with the plans to operate the former office building as a hotel.

Siva, Toh, Nabeel and Sarkunan have placed this deal on their list.

“The asset is a well-known building, strategically located and poised for redevelopment or refurbishment,” Toh says.

Nabeel notes that based on the reported transaction value, the deal appears expensive on the basis of the land only, which is how some investors assessed it previously, given the age of the building. “This, however, suggests that the plans to renovate it into a boutique hotel must be quite advanced, adding significant value to the as-is proposition.”

Had it been a land-only deal, the RM190 million paid would work out to RM8,669.74 psf for the land with an area of 21,915.30 sq ft.

Another hotel deal the real estate experts felt was worth putting on their list was the sale of Royale Chulan Bukit Bintang in KL. While Boustead Holdings Bhd inked a deal to sell the hotel to Singapore’s Hotel Royal Ltd in March 2019, the deal was never completed. In January this year, Boustead announced that the asset would be sold at a reduced price of RM177.3 million, or 10% lower, after considering the prevailing market conditions and the market value of the hotel.

Adzman finds it noteworthy as the price was reduced, while Toh says the sale was significant as it set a benchmark for a buyer’s expectation and a seller’s willingness to relinquish its hospitality asset during a pandemic. He adds that the 10% reduction will form the basis for many hotel transactions during this pandemic period.

The sale of the 6.4-acre site of the former International School of Kuala Lumpur in Ukay Heights, Ampang, was finally completed this year. The site was put up for sale in 2018. It was reportedly sold for RM50 million to Ukay Builders Sdn Bhd.

“A time-tested international school location acquired for its commercial redevelopment potential, it is also one of the rare occasions on which a school property is sold without an operator in place, that is, without a sale and leaseback,” Nabeel says of the deal brokered by his firm.

Up north in Penang, the Logan Heritage Building at Beach Street, located within the Unesco World Heritage Site, was sold by OCBC Bank to Tiong Thye Properties Sdn Bhd for RM32.6 million. Foo, whose firm brokered the deal, says: “Demand for heritage buildings is still going strong despite the pandemic due to appreciation for their inherent and historical values.”

Meanwhile, a four-storey detached house on a 36,072 sq ft plot located in Lorong Duta 2 was transacted between a company owned by a businessman and his daughter. The house was sold to the latter for RM30 million. “This is on our list because it’s the most expensive single residential transaction this year. Kenny Hills and Taman Duta remain the most sought-after residential addresses in Kuala Lumpur,” Siva says.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.