This article first appeared in City & Country, The Edge Malaysia Weekly on March 7, 2022 - March 13, 2022

The overall property market in Malaysia is gradually recovering, registering a higher volume and value of property transactions, according to Knight Frank Malaysia’s Real Estate Highlights 2H2021 report. The report, released on Jan 6, shows the findings on property market performance across Penang, Johor Baru and Kota Kinabalu as well as the Klang Valley (featured in City & Country in The Edge Malaysia, Issue 1406).

However, there were fewer completions and launches in the country in the second half of 2021 (2H2021) as the strict containment measures to curb the spread of Covid-19 delayed construction works, project delivery and the completion of real estate transactions.

The cumulative existing supply of high-rise residential property in Penang stood at 278,867 units in 3Q2021, an increase of 4.2% year on year. “A total of 217,037 high-rise units are located in Penang Island, while the remaining 61,830 units are on the mainland. The overhang in the condominium/apartment segment stood at 3,872 units in 3Q2021,” says the report.

Phase 1 of Ideal Property Group’s Queens Residences in Bayan Lepas was completed during the review period. Located near Queensbay Mall, the units have built-ups of 950 to 1,650 sq ft and are priced from RM865 psf.

The report notes that the average asking prices of selected high-end condominiums in George Town city centre measuring 2,200 to 2,800 sq ft are in the region of RM1,000 to RM1,250 psf. The larger units with built-ups of more than 4,000 sq ft in Gurney Drive command prices of RM550 to RM900 psf.

“In Tanjung Tokong/Tanjung Bunga, the average asking prices of units with built-ups of 1,600 to 6,000 sq ft range from RM500 to RM950 psf, depending on the location, scheme, unit size and floor level. As for schemes in Gelugor, units sized below 2,000 sq ft have an average asking price of RM600 to RM900 psf.”

For the office sector, the existing supply of privately owned purpose-built offices (PBOs) on the island increased to 7.3 million sq ft in the quarter but remained unchanged at 1.6 million sq ft on the mainland. The average occupancy rate was 85% and 57% respectively.

“The average occupancy rates for monitored office buildings in George Town are between 75% and 98%. For selected better-grade office buildings located outside George Town, such as Menara IJM Land, Suntech @ Penang Cybercity, One Precinct and GBS@Mayang, the average occupancy rates are in the region of 83% to 95%,” says the report.

It adds that monthly asking rents for selected office buildings under review in George Town have remained stable at RM2.80 to RM5 psf. Selected business premises and hotels such as M Summit 191 and G Hotel Kelawai were transformed into co-working spaces during the review period.

To meet the growing demand for Global Business Services (GBS), Penang intends to set up two more GBS facilities of about 300,000 sq ft in the next two to three years, which will be located near the existing GBS@Mayang and Bayan Lepas industrial area.

Meanwhile, there were over 109 existing shopping malls with a collective retail space of about 20.1 million sq ft in 3Q2021. Knight Frank notes that the overall occupancy rate during the period was lower at 71.2% compared with 72.9% in 3Q2020. Similarly, the overall occupancy rate in George Town also decreased to 76.9%.

“There was only one expansion during the review period — Sunway Carnival Mall in Seberang Jaya — which is set to increase its number of shops, from 220 to 350. Scheduled to open on April 1 this year, the RM500 million extension will increase the lettable area to one million sq ft with a confirmed occupancy rate of 95%.”

The report states that the monthly rents for ground floor shops in selected shopping centres in George Town have generally declined, ranging from RM4 to RM48 psf, depending on the mall, location and unit size.

Several grocery chains have also opened. “City Junction Mall welcomed Village Grocer which occupies about 22,000 sq ft of space while Lotus Store launched its second flagship store, Lotus’s Penang E-gate in Gelugor. South Korea’s convenience store CU Mart also opened a few outlets in Penang Island last December,” it adds.

For the industrial sector, Penang approved 80 manufacturing projects with a total investment of RM2.9 billion in the first nine months of 2021. The report states that Lam Research Corp and Iconic Medicare have completed their manufacturing facilities on sites measuring about 34 acres and 5.5 acres respectively in Batu Kawan Industrial Park. Currently the largest Lam Research facility, it measures 800,000 sq ft, while the Iconic Medicare facility can produce 3.3 billion pieces of gloves and 220 million pieces of medical face masks a year.

“HS Petchem Logistics Sdn Bhd, a wholly­-owned subsidiary of Hong Seng Consolidated Bhd, has sub-leased a three-acre leasehold parcel in Prai Bulk Cargo Terminal for 20 years at RM8.53 million. The company plans to construct a tank farm facility and provide integrated logistics services to its wholly-owned subsidiary, Hong Seng Industries Sdn Bhd, and other nitrile butadiene latex (NBL) manufacturers.”

In Johor Baru, the total supply of high-rise residential property stood at 145,375 units in 3Q2021, an increase of 4.2%. “The volume of transactions for both the condominium and serviced apartment categories decreased by 19.7% and 12.5% y-o-y respectively. In contrast, the value of transactions for condominiums increased marginally by 0.2%, [while there was a] decrease in transacted volume, indicating that higher value units were transacted during the review period,” says the report.

There was a decline in the asking price of selected high-rise residential schemes due to weakened market sentiment following the third lockdown in June last year. Knight Frank opines that alternative investment strategies for high-rise residential projects such as those targeted at co-living concepts have also surfaced. Typically, buildings with low occupancy rates but are strategically located and surrounded by amenities are preferred by co-living operators.

The cumulative supply of PBOs remained at 11.8 million sq ft in 3Q2021, an increase of 7.7% y-o-y. Notable incoming supply such as Sunway Big Box Office Tower, Coronation Square Office Tower @ Ibrahim International Business District, Menara UMLand and Mid Valley Southkey Office Tower will add about 1.77 million sq ft to the cumulative stock.

“The asking rental for office space continued to hold steady during the review period. There were generally fewer leasing activities in 2H2021 compared with 1H2021. Common Ground @ Iskandar Space will commence operations at Medini 6, occupying about 14,000 sq ft of space,” says the report, adding that the retail space recorded about 20.4 million sq ft of total space with a lower overall occupancy rate of 73.2%.

Eco Galleria, which was recently completed, is a high-street concept mall that forms part of the Eco Botanic integrated development in Iskandar Puteri. The University of Southampton Malaysia is one of its notable tenants, occupying about 150,000 sq ft of space.

Uncle Don’s has also ventured into Johor’s market by opening outlets at Taman Pelangi, Taman Mount Austin and Taman Sutera Utama.

Meanwhile, the state has seen more foreign investments pouring into the establishment of data centres. “In July 2021, China-based IT service management company GDS Holdings Ltd announced its expansion into Southeast Asia with plans to develop a hyperscale data centre campus in Nusajaya Tech Park, which will have a total net floor area of about 242,188 sq ft. The first phase is expected to be completed in early 2024,” says the report.

Bridge Data Centres, headquartered in Singapore, has announced that its new data centre (MY06) is underway in Johor’s Kulai Iskandar Data Exchange. Phase 1 is set for service towards end-2022, with Phase 2 due for completion shortly thereafter.

The report also notes that Taiwan-based computer manufacturing company Wiwynn Corp has expanded its footprint, following its announcement of a server rack integration plant development at Senai Airport City. This is the company’s first self-built overseas station in Asia-Pacific.

There were fewer new launches in Kota Kinabalu during the review period, comprising mainly smaller-scale landed schemes. Knight Frank says larger developments such as V21 Residence, Acacia @ Menggatal, Taman Sri Lemawang and Residensi Seri Akasia continued to release their remaining units/phases, while selected developers opted to review and reposition their products in the light of increased building material costs, changing market trends and consumer behaviour.

“During the review period, the asking rental of selected condominiums in Kota Kinabalu city centre and its fringe areas ranged from RM1.10 to RM3.70 psf per month, while the asking rental in other localities were generally lower, ranging from RM1 to RM2.75 psf per month,” says the report.

As at end-3Q2021, the existing supply of privately owned PBOs stood at 5.3 million sq ft, with an average occupancy rate of 82.9%.

Wisma Kosan, an office building sitting on a 1.85-acre parcel at Jalan Tuaran, will be demolished for the development of a new commercial suites project called Likas Vue. “The project, to be developed by Asian Pac Holdings Bhd, will feature a 36-storey building with a total of 650 suites, including conventional and dual-key units, with built-ups of 884 to 1,052 sq ft,” it says.

In terms of notable tenant movements, 2H2021 saw the entry of SK Nexilis Malaysia Sdn Bhd and Sinkang Administration Sdn Bhd into Plaza Shell, a Grade A office building located in the heart of the Kota Kinabalu central business district (CBD). During the review period, asking gross rentals of privately owned CBD office space ranged from RM1.90 to RM6 psf per month.

For the retail sector, the total retail space within shopping complexes stood at 5.94 million sq ft as at end-3Q2021, with an average occupancy rate of about 79.1%.

“The review period saw the entry of F&B, grocery and homeware retailers into Imago Mall and Suria Sabah Shopping Mall. The food and grocery sub-industry continued to experience growth in the form of new neighbourhood grocery stores, fresh markets and supermarkets,” it says.

The entry of Bataras Superstore into Suria Sabah Shopping Mall to replace City Grocer Supermarket is an example of its recent business expansion strategy to gain a larger share of the local market. “Bataras is now one of the largest food and grocery chains in Sabah with a total of 30 supermarket/hypermarket outlets, with 12 of its stores in Kota Kinabalu.

“The Parq @ Aeropod was also recently completed. Developed by Aeropod Sdn Bhd, a subsidiary of S P Setia Bhd, the retail-­office development features 22 en-bloc retail offices, each comprising four levels of retail space and four levels of office space,” it says.

At the same time, key tourist destinations such as Mount Kinabalu, local beaches and islands experienced a strong recovery with a high number of visitors arising from pent-up demand. As such, hotels and resorts in these areas enjoyed high occupancy rates, especially with travellers capitalising on existing promotional packages.

Knight Frank opines that this positive response shows the resilience and innate potential of Sabah’s tourism and hospitality industry, which has been garnering increased interest from both local and international parties, with selected parties commencing preparatory works for projects in the pipeline.

For instance, Taiwan real estate firm Sinyi Realty Inc has proposed to develop a RM1 billion luxury five-star ecotourism resort on Mengalum Island, in addition to restoring the island via reforestation and the rehabilitation of damaged coral reefs.

In addition, the state is anticipating the completion of some notable hotels and resorts within the next five years. “Alila Dalit Bay Sabah is an eco-luxury, sustainable and lifestyle resort featuring a 152-key hotel and 74 private villas. During the review period, the hotel component recorded building completion, with a commercial [area] slated to open in 1H2022. It comprises a total of 136 standard rooms, 14 garden suites and two penthouse units,” says the report.

“The four-star Luma Hotel is the first hotel in Sabah affiliated with Design Hotels by Marriott Bonvoy. Strategically located at Sutera Avenue, the 10-storey hotel offers 115 rooms with built-ups of 547 sq ft and is expected to open in 1H2022.”

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