The changing face of industrial property
By Yanika Liew
Despite comprising only 2% of the property market, the industrial sector led the market in 2021. With the value for industrial properties increasing by 53% and the industrial sector accounting for 48% of total property transactions, the sector is expected to continue its strong growth trajectory in 2022. In comparison, transactions of commercial and retail sectors came to a near standstill throughout the pandemic.
While there was a decrease in industrial property from 2019 to 2020, the industrial developments being overlooked were typical designs such as terrace and semi-detached factories. It is clear that the market is demanding more from industrialists and investors, but what exactly does more entail?
In the past, warehouses used to be simple buildings consisting of a large, single space for storing and loading products. Most warehouses only have one ground floor, with the look and feel of a tin shed. Now, these old designs need an upgrade.
Welcoming the Fourth Industrial Revolution (IR 4.0), companies are demanding a more modern design, which could be anything ranging from multiple storeys to the implementation of facilities like jogging tracks, swimming pools and tennis courts. Industrialists are increasingly looking toward factors of livability to lure home local talents and attract international ones.
“If you go to Singapore, six, seven and eight floors are common. If you go to Hong Kong, 15 floors are common. So it’s like an office building. Instead of a 15-storey office building, you actually have a 15-storey warehouse,” Rahim & Co International Sdn Bhd real estate agency chief executive officer Siva Shanker said.
Mega distribution hub
Area Logistics, by Area Management Sdn Bhd, is an example of modern industrial development. Not only is it Malaysia's first three-storey ramp-up inner-city mega distribution hub, but the 17.7-acre facility is also located 10 minutes away from Kuala Lumpur City Centre, allowing its workers and tenants easy access to nearby malls, food and beverage outlets and other establishments. These factors of connectivity present Area Logistics as an attractive place of employment, and increases the efficiency of its tenants, which are primarily e-commerce brands such as Shopee and Lazada, said Siva.
What if developers took the concept of industrial livability even further? Area Compass @ Kota Seri Langat aims to integrate industrial work life and lifestyle, providing amenities such as a clinic, food court, sporting facilities and more within the development itself. Furthermore, worker accommodations are being developed a short walk from their employment. Compass also has a direct interchange to the West Coast Highway (WCE), allowing workers access to Klang Valley through its highways.
“As you go into it, you’d think it was a high-end condo. It has workers' quarters. It has a nice makan place, a jogging track, a bicycle track and greenery. So this is the way (forward). Industrialists now no longer want spartan finishes. They want a bit of look and feel. They want a bit of lifestyle to attract talent,” Siva said.
Similar projects have not just sprouted up in the Klang Valley but also in Johor and Penang where there is a demand for such developments. It is not surprising that developers like EcoWorld Development Group Bhd to hop on the bandwagon with their Eco Business Park series.
Rapid urbanisation has increased demand for bigger warehouses, particularly from e-commerce businesses, which have flourished since the pandemic. However, with 66% of property development being residential, the supply of these industrial developments is being vastly overlooked and requirements for new warehouses are starting to change.
Another interesting consequence of the new demand is that warehouses with higher eaves height are now preferred. Where previously companies only needed racking systems of up to seven levels, they are now looking to go higher, noted Siva.
When it comes to efficiency, more sophisticated and dynamic racking systems are being sought after, such as automated machines being used to fetch products, reducing the need for human labour. Companies want warehouses which are equipped with better safety systems, with Siva pointing out that the most common accidents within a warehouse occur because of forklifts. Another requirement for an improved development is higher load-bearing floors to accommodate heavier machinery.
The issue of land space is prevalent when talking about industrial developments, which necessitate a large amount of land. Industrialists want larger spaces near ports, for ease of transportation. However, such resources are difficult to find in the economic centres of Kuala Lumpur and Klang, so companies will be forced to move to places like Perak and Kedah for sizable land to accommodate their businesses. In their quest for cheaper land, Siva speculates industries will begin moving towards Perak, as Perak is well-positioned between Penang and Kuala Lumpur.
“What’s going to happen really, is as these preferred locations become more expensive and more dense and land availability continues to reduce, we are going to be seeing industrialists wanting to expand and move towards other locations. Negeri Sembilan and Melaka are obvious choices, but we are going to start seeing Ipoh and Perak prospering as well,” Siva said.