Malaysia poised for growth in logistics sector

Posted on 10 Jan 2020
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KUALA LUMPUR: Malaysia’s readiness as a regional logistics hub is materialising with impactful on-going projects and initiatives such as the Digital Free Trade Zone, the Regional E-commerce and Logistics Hub at KLIA Aeropolis, the East Coast Rail Link and the West Coast Expressway (WCE). 

The National Budget 2020 also supported the logistics sector with the allocation of RM50mil for the repair and maintenance of roads leading to Port Klang.

Underpinned by increasing global e-commerce trade and consumer spending, logistics services are poised for growth, and this will translate to higher demand for logistics and warehousing space.

The revival of notable mega infrastructure projects in 2019, namely the East Coast Rail Link and the Bandar Malaysia continues to improve market sentiments and restore investors’ confidence.

Note that the Bandar Malaysia project will house a station of the Kuala Lumpur-Singapore High-Speed Rail. In the southern region, the long-awaited Johor Bahru—Singapore Rapid Transit System has also been given the greenlight.

Knight Frank Malaysia executive director (capital markets) Allan Sim said, “These revived projects point to more clarity in government policies and are a boon to the country’s economy and construction sector.

“Growth in the manufacturing sector is expected to regain momentum moving into 2020 after slowing to 3.6% in 3Q2019 against 4.3% in 2Q2019.”

Sim foresees Selangor and Johor garnering more interests from manufacturers and investors alike, with industrial players having a preference for the Shah Alam, Bukit Jelutong locale due to its strategic positioning with good accessibility and connectivity.

However, due to the scarcity of sizable land and high land cost, Knight Frank Malaysia observed an overspill to other areas. Sim explained that the on-going WCE with an interchange at Banting to be completed by early 2021 has opened up new opportunities for the locality, attracting the attention of major logistics and industrial players.

Nestle’s distribution centre being phase one of Axis Mega Distribution Centre and the upcoming development of The Compass @ Kota Seri Langat are both located herein.

Penang was the top recipient of foreign direct investment (FDI) inflow into Malaysia. In the first nine months of 2019, the state garnered RM13.2bil in total approved manufacturing investments (RM12bil FDI and RM1.2bil domestic investments) from 113 projects, surpassing the RM5.78bil achieved for the entire year in 2018.

Knight Frank Penang resident director Tay Tam said, “This is a tremendous boost to the state and augurs well for the short and medium-term growth of the sector.

“The outlook for 2020 is very positive. In tandem with the robust performance of the manufacturing sector and the e-commerce platform, demand for logistics and warehousing facilities is set to grow in the coming year too.”

According to Iskandar Regional Development Authority, the manufacturing sector was leading the numbers among the sectors in Johor Bahru and contributed 24% to the total cumulative investment for the region as of June 2019.

Knight Frank Johor branch head Debbie Choy said, “We have seen significant industrial transactions in the Port of Tanjung Pelepas (PTP) and Nusajaya Tech Park, which proved that these areas are popular among investors and industrialists due to their established facilities and infrastructure.

“We are also pleased to share that Knight Frank successfully facilitated the concluded deal of the Specialized Technology Resource (Malaysia) Sdn Bhd’s factory in PTP. “

Choy said the outlook for the industrial market is one of optimism with 2019 witnessing the listings of two Johor based industrial players, namely AME Elite Consortium and Spring Art Holdings Sdn Bhd in Bursa Malaysia. This is a positive sign that industrial players in the state have the potential to grow further in the future, she said.

Outlook moving into 2020, Malaysia’s industrial sector remains promising, supported by various initiatives as announced in the National Budget 2020.

All in all, Knight Frank Malaysia foresees the industrial sector to be the forerunner of the country, particularly in the states of Selangor, Penang and Johor, which are the primary destinations for investment.

 

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