clock 03-08-2023
hit 1,147
Knight Frank Real Estate Highlights - 1st Half 2023

Malaysia’s economy continues its strong growth momentum, underpinned by a strong pick-up in domestic demand, improving labour market conditions as well as favourable policy support. Knight Frank Malaysia, the independent global property consultancy, has released its Real Estate Highlights 1st Half of 2023 (“REH”) which features insights into the

performance of the property markets across Klang Valley, Penang, Johor Bahru and Kota Kinabalu.



Keith Ooi, Group Managing Director, Knight Frank Malaysia said, “The real estate sector has shown promising signs of growth and resilience during the first half of this year, supported by a favourable economic landscape. However, amid growing external headwinds, Bank Negara Malaysia (BNM) expects the country’s economic growth to moderate to between 4.0% and 5.0% in 2023, underpinned by firm domestic demand.”



RESIDENTIAL SECTOR



The country’s residential property market staged a strong rebound in 2022 with a 22.4% yearly increase in sales volume and a corresponding 22.6% growth in sales value following the normalisation of economic activity (2022: 243,266 residential transactions valued at RM94,319.43 million / 2021: 198,825 residential transactions valued at RM76,903.22 million). In the first quarter of this year (1Q2023), 53,923 residential properties with a collective value of RM20,874.56 million changed hands.



According to Judy Ong, Senior Executive Director of Research and Consultancy, Knight Frank Malaysia, “During the review period, the condominium / serviced apartment segment in Kuala Lumpur experienced mixed trends in prices.” The localities of Kenny Hills and Mont Kiara witnessed price growth, while for KL City and Bangsar, there were slight dips in the average transacted prices. As for the localities of Ampang Hilir / U-Thant and Damansara Heights, the prices held steady. Overall, the average transacted prices of high-end condominiums / serviced apartments in Kuala Lumpur were
marginally lower by circa 1.3% in 1H2023 when compared to the preceding period (2H2022).



Looking ahead, the recovery of the residential property market remains cautiously optimistic albeit
at a slower pace, weighed down by rising borrowing costs and inflationary pressures amid a slowing
economy.



OFFICE SECTOR



Teh Young Khean, Executive Director of Office Strategy and Solutions, Knight Frank Malaysia said, “We are observing strengthening market activity as the business climate continues to stabilise. Enquiry activity is on the rise as companies experiencing growth are seeking expansion and exploiting the tenant market to leverage the opportunity to upgrade the quality of the office space they occupy. Adding impetus to this flight to quality is the emphasis on ESG targets by companies with global mandates and landlords are strengthening their portfolios to deliver spaces that can match these requirements. The commercial office market in Kuala Lumpur continues to be dynamic and activity in the sector is encouraging.”



In KL Fringe, market demand for office spaces remains steady, displaying healthy rental and occupancy levels, driven by a tight supply of high-quality decentralised offices, particularly in areas with ease of accessibility and adequate transportation links. Some MNC occupiers are prepared to accept a slight premium to enjoy the benefits of this locality.



Similarly, in Selangor, Grade A offices, especially in well-connected locations that also offer a wide array of amenities, are witnessing good take-up amid steady rental levels. Good quality decentralised office spaces with attractive rental packages remain favourable to capture market demand.



RETAIL SECTOR



Malaysia’s retail sales expanded 13.8% in 1Q2023 following an impressive growth of 33.3% for the full year of 2022. However, with slowing global growth amid a weaker economic outlook, annual retail sales growth for 2023 is projected to moderate to 4.8%.



The MIER Consumer Sentiments Index (CSI) fell below the 100-point optimism threshold to record 99.2 points in 1Q2023. Reversing the positive trajectory since 2Q2022, the current reading signifies declining consumer confidence due to weaker employment and income growth prospects amid a high inflationary environment (MIER Employment Index 4Q2022: 122.5 points / 1Q2023: 109.8 points).



Yuen May Chee, Director of Property Management, Knight Frank Malaysia said that the next half of the year (2H2023) will see the scheduled completions/openings of The Exchange TRX and Pavilion Damansara Heights (Phase 1); two highly anticipated shopping centres with a collective retail space of circa 1.83 million sq ft.



With the changing landscape in consumers' attitudes, behaviours and purchasing habits, stakeholders are placing greater emphasis on convenience and accessibility as well as creating immersive experiences to drive sales. They are also pivoting towards sustainability and ESG initiatives, backed by regulators and financial institutions.



The return of international tourists, particularly from China, following increased flight routes and frequencies, is positive for the retail sector. However, the upcoming Luxury Goods Tax in 2H2023 could impact luxury goods' competitiveness and deter tourist arrivals, potentially affecting retail sales growth. Despite this, the local retail sector is expected to sustain due to stable labour market as well as firm domestic demand.



INDUSTRIAL SECTOR



In 1Q2023, Malaysia attracted RM71.4 billion in investments, generating 23,977 new job opportunities. Approved foreign direct investments (FDI) contributed RM37.5 billion (52.5%), with Singapore leading the way (RM11.5 billion), followed by significant contributions from the British Virgin Islands, China, Hong Kong and South Korea. The remaining RM33.9 billion (47.5%) came from domestic direct investments (DDI). This demonstrates impressive growth compared to RM42.8 billion invested in 1Q2022.



An exemplary illustration of Malaysia's market potential and institutional strengths is evident from the recent commitments made by industry giants, Tesla and Amazon Web Services. Tesla’s plan to set up a head office and Tesla Experience Service Centre through MITI’s Battery Electric Vehicle (BEV) Global Leaders initiative is set to boost market demand and promote the growth of the entire ecosystem to encourage EV adoption. Since 2018 till March 2023, the Malaysian Investment Development Authority (MIDA) has approved a total of 58 projects worth RM26.2 billion in the EV
sector and its related ecosystems.



Amazon Web Services' ambitious plan to establish an AWS Region to develop its cloud services via the investment of approximately RM25.5 billion (USD 6 billion) by 2037 further exemplifies its confidence in Malaysia's promising digital economy. This bold investment, one of the largest international technology investments into Malaysia, reinforces the country’s standing as one of the more attractive destinations for businesses seeking to thrive in the dynamic Southeast Asian market.



In comparing the two quarters, the volume of transactions in 1Q2023 was lower by around 22.5% compared to 4Q2022. However, there was an 8.3% increase in sales value. The average value per industrial transaction also saw a significant rise, from approximately RM3.49 million in 4Q2022 to about RM4.88 million in 1Q2023. The overall prices and rental in industrial sector have experienced an incline across the nation.



According to Allan Sim, Executive Director of Land and Industrial Solutions at Knight Frank Malaysia, “The industrial market in Klang Valley continues to gain momentum, propelled by a surge in demand from end-users, manufacturers, and investors. This growth can be largely attributed to the geopolitical climate and proactive government initiatives aimed at bolstering economic activities.”



Moreover, the forthcoming completions of major infrastructure projects, such as the West Coast Expressway (WCE) and the East Coast Rail Link (ECRL) by 2025 and 2027 respectively, are set to revolutionize connectivity between industrial areas in the region. “This is foreseen to have a profound and positive impact on the industrial and logistics markets, paving way for enhanced efficiency and competitiveness. As a result, the region is expected to witness a spark in growth of well-planned industrial parks leveraging on the infrastructure development of the country,” Sim
commented.



Additionally, Malaysia as a preferred FDI destination is further cemented through the announcements of incoming data centre players like Australia’s NEXTDC’s KL1 and Bridge Data Centres (BDC) which is expanding its hyperscale data centre called MY03. A few other operators are also setting up colocation operations within the Kuala Lumpur City Centre, outside of the established data centre ecosystems in Cyberjaya and Sedenak. The mushrooming of data centre developments in Malaysia, supported by a significant uptake of 113 MW in 2022, has positioned Malaysia as the most
attractive destination for data centre investment as indicated by the Knight Frank SEA-5 Data Centre Opportunity Index (SEA-5 Index).



SABAH PROPERTY MARKET



Alexel Chen, Executive Director, Knight Frank Sabah says that the property market in Sabah experienced a strong rebound in 2022, with transaction activity reaching its highest level in the past five years. This indicates a significant recovery and renewed interest in the market.



The residential segment in Kota Kinabalu has shown increased activity, with a greater number of new launches and upcoming projects in the pipeline during the review period. Nonetheless, the pent-up demand post-COVID-19 that induced a surge in transaction activity in the secondary market is expected to moderate, especially with the multiple hikes in OPR leading to higher borrowing costs.



Notable shopping malls in Kota Kinabalu were observed to prioritize tenant mix restructuring to strengthen and differentiate their market positioning. These efforts aim to enhance the overall appeal and unique offerings of these malls, attracting a diverse range of tenants and customers. The hotel and resort sector, especially those in the 4 and 5-star categories continued to observe improved performance, supported by the ongoing reinstatement of direct international flights from various destinations.



These highlights showcase the positive trends and developments within the Sabah property market. The strong rebound, increased activity in the residential launches, focus on enhancing shopping mall tenant mix, and introducing new hotels reflect the growth and potential in the Sabah real estate market.



OUTLOOK



Malaysia’s economy will continue its recovery albeit at a slower pace, amid the shadows of an overcast global economy. Rounding off the outlook for 2023, Keith Ooi concluded that to drive the property sector forward, the key initiative should be to introduce green incentives. “We hope that the government will continue to introduce ‘green incentives’ aimed at property buyers, landlords, occupiers and developers who are aligned with the nation’s target of becoming a ‘net zero’ nation by 2050,” he said as the growing awareness and adoption of ESG frameworks in the property market will help drive the value of sustainable real estate moving forward.


Tags / Keywords:




footer tagline