by 
22nd September 2024
Explore the latest trends in Malaysia’s industrial real estate market, including key opportunities in Klang Valley, Penang, Kulim, and Johor Bahru. Learn how geopolitical tensions and foreign investment are shaping the future.
In February 2024, Malaysia’s manufacturing sector experienced a notable boost, with the Production Index rising by 4.9% year-over-year, according to Malaysia’s Industrial Production Index. Additionally, the Department of Statistics Malaysia reported a significant 10.3% increase in the sales value of the manufacturing industry, reaching RM 145.2 billion in February 2023.
Key subsectors driving this growth include Electrical & Electronic Products (33.2%), Petroleum, Chemical, Rubber & Plastic (24.7%), and Food, Beverages & Tobacco (17.5%). This uptick in manufacturing output is leading to increased demand for industrial real estate and factory rentals across Malaysia, positioning the nation as a prime destination for industrial property investments. In this article, we’ll dive into the current trends and opportunities in Malaysia’s industrial parks and explore how these developments impact the industrial real estate market.
YoY change in Sales Value of Manufacturing Sector (%)
Growth Trends for Industrial Real Estate in Malaysia
The recovery of Malaysia’s manufacturing sector is driving demand for industrial real estate, particularly in zones that host electronics clusters. According to DataSense by PropertyGuru For Business, Puchong in Selangor is currently the most sought-after location for industrial property and factory rentals. Puchong’s robust industrial base and strategic proximity to major growth centres make it an attractive spot for businesses. Key industrial zones in Puchong include Kinrara Industrial Park, Puchong Industrial Park, and Taman Perindustrian Puchong Utama.
Next in line is Shah Alam, home to expanding Electronics and Electrical clusters. Industrial parks like Shah Alam Industrial Park and Glenmarie Industrial Park have seen a surge in interest from companies in these sectors, while Bukit Raja Selatan and Hicom Industrial Park cater to the life sciences sector.
Johor Bahru is emerging as a critical hub for technological investments, with Zerin Properties forecasting RM 17 billion in new data centre investments in 2024. This follows RM 51.1 billion in investments from 2022, highlighting the region’s growing appeal for high-tech industries.
Top 10 City/Area by Demand Index of Factory to Rent
Impact of Geopolitical Tensions on Malaysia’s Manufacturing Sector
The ongoing trade tensions between China and the US have driven global companies to diversify their manufacturing locations, often referred to as the “China Plus One” strategy. Malaysia has become a key beneficiary of this trend. Since 2021, the country has witnessed substantial foreign direct investment (FDI) in the technology sector, with companies like Intel and Infineon Technologies committing billions of dollars to expand operations.
Penang and Kulim, in particular, are benefiting from this shift. The industrial real estate markets in these areas are experiencing a surge in demand for factory rentals as more technology companies move their manufacturing operations out of China.
Penang and Kulim: Unlikely Beneficiaries of Trade Tensions
DataSense reports indicate that Batu Kawan Industrial Park in Penang saw an 86.3% increase in demand for factory rentals in March 2024. The average rental price per square foot has risen steadily since 2021, as more global manufacturers set up shop in the region. Boston Scientific Corporation and Western Digital are just a few examples of multinational companies expanding their footprint in Penang’s thriving industrial zones.
Similarly, Kulim has seen a 13.5% month-on-month increase in demand as of March 2024. The median rent per square foot in Kulim rose from RM 1.50 in 2023 to RM 1.67 in March 2024, demonstrating the area’s growing importance as a strategic location for industrial activities.
Supply Index and Demand Index Trend for Factory to Rent in Batu Kawan
Demand Median Rent Per Square Foot
Supply Index and Demand Index Trend for Factory to Rent in Kulim
Demand Median Rent Per Square Foot
The Future of Malaysia’s Industrial Real Estate
As global manufacturing shifts, Malaysia’s industrial hubs—especially in Penang and Kulim—are poised to play a critical role in bridging gaps in the global supply chain. With heightened geopolitical tensions driving companies to diversify their operations, Malaysia is emerging as a key destination for foreign direct investment in the manufacturing sector.
Investors looking to capitalise on these trends should pay close attention to the continued growth of industrial parks and factory rental demand in Malaysia. The robust demand for industrial real estate, coupled with favourable government policies and infrastructure developments, makes the country a hotspot for industrial property investments.
Conclusion
The growth in Malaysia’s manufacturing sector and the rise of industrial parks in areas like Puchong, Shah Alam, Penang, and Kulim offer a wealth of opportunities for investors. With global companies seeking to diversify their supply chains and mitigate risks, Malaysia’s industrial real estate market is set for continued growth.
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