This article first appeared in The Edge Malaysia Weekly on December 26, 2022 - January 1, 2023

THE property market in 2022 fared better than in 2021 as the country transitioned to the endemic phase of Covid-19 with most restrictions eased. Transactions were up across the board this year, the pace picking up significantly towards the fourth quarter of 2022.

As in 2021, the buying and selling of development land and industrial assets remained positive. There was also heightened activity in retail real estate investment trusts (REITs).

“The property market was optimistic in 1Q2022 as the country was moving into the endemic phase. Sentiments remained positive as countries were preparing to open their borders. However, Russia’s invasion of Ukraine spiralled the world into high inflation, causing the cost of materials to rise. Then, Bank Negara Malaysia hiked interest rates to help ease inflation,” Stanley Toh, executive director of Laurelcap Sdn Bhd, says of events affecting the property market this year.

“The political instability further exacerbated the situation, adding to the myriad of negative sentiments we were already facing. As a result, many developers and investors remained cautious about purchasing property in 1H2022,” he tells The Edge.

Nevertheless, interest in the industrial segment as well as retail and hospitality remained positive due to pent-up demand following two years of lockdown. “Consumer spending saw a huge jump from the previous year while hotel occupancy rates were encouraging. Towards the end of 2022, we saw shopping malls being transacted. This bodes well for the retail sector,” Toh points out.

CBRE | WTW group managing director Tan Ka Leong describes 2022 as a robust year for the property market when compared with 2021, given the increase in the number and value of property transactions. “This reflects developers’ and investors’ positive sentiment towards the country’s economic and property [market] outlook.

“Similar to 2021, industrial property demand was maintained with transactions of industrial parks, premises and land, totalling a cumulative transaction value of RM810 million,” Tan says, adding that the encouraging trend in industrial land and property is expected to continue in 2023.

He highlights that the transactions of retail properties improved this year with a cumulative transaction of RM2.5 billion (involving four transactions) and observes that there was also an increase in property absorption into REITs including Pavilion REIT in the retail segment, and Sunway REIT, Axis REIT and KIP REIT in the industrial segment.

“2022 clocked in quite a few large and significant transactions across the board in all real estate sectors (retail, industrial, office, hotel and land),” Knight Frank Malaysia deputy group managing director Keith Ooi says, adding that the largest transaction was in the shopping mall segment.

He notes that despite the economic slowdown due to geopolitical tensions and supply chain disruptions, property transactions in 2022 bucked the trend and performed in line with expectations that it would be a better year than the Covid-19 years of 2021 and 2020.

As in previous years, The Edge reached out to real estate experts for their list of top 10 property deals in 2022. Apart from Toh, Tan and Ooi, the other participants were ExaStrata Solutions Sdn Bhd CEO/chief real estate consultant Adzman Shah Mohd Ariffin, Rahim & Co CEO of real estate agency Siva Shanker and Savills Malaysia deputy managing director Nabeel Hussain.

The sale of Sheraton Imperial Kuala Lumpur Hotel emerged as the winner as all six property experts placed the deal on their Top 10 property deals list. The 398-room five-star hotel asset was sold for RM235 million to Achi Jaya Plantations Sdn Bhd, a company linked to Sarawak Governor Tun Abdul Taib Mahmud’s brother and long-time business associate, Tan Sri Datuk Wira Onn Mahmud.

News that the asset owner, Inter Heritage (M) Sdn Bhd, had put the hotel up for sale first appeared in May 2019 but a deal was only executed this year. Inter Heritage is 51%-owned by Indonesian billionaire Tan Sri Peter Sondakh’s Rajawali Group and 49% by Marriott International.

“The hotel was a good buy for Achi Jaya as it managed to acquire the asset at a relatively low price per room for a prime property in a good location,” Toh explains.

For Siva, the deal is “a sign that hospitality assets in the Golden Triangle/Jalan Sultan Ismail are still in demand”. He points out that this is the third notable transaction in the area apart from Renaissance Kuala Lumpur and Wisma KFC (which will be converted into a hotel).

“The hotel was brought onto the market long before the Covid-19 outbreak and transacted at a price below market expectations,” Nabeel says, while Tan picked this deal because the purchase is reflective of investors’ renewed interest in hotel properties in the Kuala Lumpur city centre.

For Adzman, it was the price. At RM590,452 per room, it is the highest per room deal transacted since 2019, when the sale of the Royale Chulan Bukit Bintang Hotel in Kuala Lumpur was inked at RM443,250 per room.

Ooi, whose firm Knight Frank brokered the deal, says the sale to Achi Jaya is the first hotel deal as the country transitioned to endemicity and that it “was the culmination of the foresight of the buyer and the owner’s acceptance of the offer that resulted in this landmark deal”. Providing some background, he adds that the hotel had received multiple offers when the asset was put up for sale in 2019. “However, due to the impact of the pandemic on the hotel and travel sector, the deal fell through.”

Transactions involving retail assets came into the spotlight this year as REITs became more active. Five out of the six property experts/valuers placed the sale of Pavilion Bukit Jalil and Queensbay Mall, Penang on their list of Top 10 property deals of 2022.

In November, Pavilion REIT inked a deal to buy the year-old Pavilion Bukit Jalil from Malton Bhd for RM2.2 billion or RM1,207 psf.

Commenting on his selection, Tan says, “Pavilion Bukit Jalil has achieved a commendable occupancy rate with good footfall despite it being just a year old and [that too] during the [transition to] endemic period. The transaction is an expression of the rebound in market confidence for prime retail properties.”

Both Ooi and Toh chose the deal because it was the largest retail asset transaction in 2022 in terms of price. Toh adds that it is a testament of the confidence level in the retail segment moving into 2023. Nabeel picked the deal because it was the “single largest retail REIT exercise in nearly a decade”.

For Adzman, he liked the deal because raising RM2.2 billion for the mall during an economic downturn is not an easy feat.

The second shopping centre, which received just as many votes as Pavilion Bukit Jalil, is Queensbay Mall. In November, CapitaLand Malaysia Trust (CLMT) bought 91.8% of the total strata floor area of retail parcels in the mall from CapitaLand Investment Ltd for RM990.5 million in a related-party transaction.

Noting that retail REITs are once again active in a big way, Nabeel says, the injection of the asset into CLMT is expected to provide some momentum for the REIT, which has not grown significantly in nearly a decade.

Adzman chose this deal because of the attractive 7.3% yield the mall will provide while Tan believes the acquisition will contribute positively to the overall property yield and value and that the transaction marks the potential for healthy growth in Penang’s retail sector.

Also worth a mention are the sale of the seven-storey 163 Retail Park in Mont’Kiara, Kuala Lumpur and AEON Seri Manjung shopping centre and land this year. The assets were sold by YNH Bhd to ALX Asset Bhd for RM270.5 million or RM1,058 psf and RM152 million respectively. Tan remarks that the sale of 163 Retail Park is an indication that market confidence in the retail sector has returned.

Within the vicinity of Mont’Kiara, Hap Seng Consolidated Bhd’s acquisition of 15.34 acres of land on Jalan Duta known as Met 3, Plot 7A, KL Metropolis did not go unnoticed. This transaction was listed by five out of the six property agents interviewed. Hap Seng bought the land from Naza TTDI Sdn Bhd’s unit KL Metropolis Sdn Bhd for RM868.8 million or RM1,300 psf. Naza TTDI is 80%-owned by Naza Corp Holdings Sdn Bhd.

Hap Seng plans to build a mixed-use development with a gross development value of RM8.7 billion on the site. This deal made it to Ooi’s and Toh’s table because it is the largest single land transaction in 2022 in terms of value.

“This signifies the continuous confidence in the Mont’Kiara enclave,” Toh says, pointing out that Mont’Kiara has seen a total investment of about RM1 billion ploughed into the area in 2022 alone.

Nabeel observes that it has been a busy year for Hap Seng both in terms of asset and land purchases. “In terms of the latter, two transactions (Met 3 plus a 1.7-acre commercial land acquisition from Naza in December 2021 for RM266 million or RM3,575 psf) brings the total investment in excess of RM1.1 billion.”

“The land is located adjacent to the Malaysia International Trade and Exhibition Centre (Mitec), which is part of the KL Metropolis development by Naza TTDI. This is the largest commercial transaction in this prime locality in recent years,” says Tan of his pick.

In the southern state of Johor, Axis REIT’s purchase of a logistics warehouse facility in Port of Tanjung Pelepas (PTP) for RM390 million was on the list of four property industry experts. Axis REIT bought the 1.55 million sq ft property from Singapore-based Equalbase PTP Sdn Bhd.

“This is the REIT’s biggest purchase to date, since the trust’s establishment,” Toh notes. Ooi concurs, adding that, “[It is] likely the largest industrial building transaction of the year.”

“Johor continues its bull run as an industrial and logistics hub,” Siva says, while for Tan, Axis REIT’s transaction is an indication that REITs continue to be major property investors.

Another deal in Johor, which was listed by four out of the six real estate agents, was UEM Sunrise Bhd’s strategy to transfer land in Gerbang Nusajaya, Iskandar Puteri within the district of Tanjung Kupang as part payment for a land purchase in Kuala Lumpur.

In August, UEM bought 6.39 acres of freehold land along Jalan Sultan Yahya Petra (formerly Jalan Semarak) for RM384.04 million or RM1,380 psf from Nipponkey Sdn Bhd. UEM then settled the RM384.04 million consideration by paying Nipponkey partly in cash and by transferring land measuring 107.82 acres valued at RM148 million.

This deal was worth putting on the list for Toh as the method of payment was partly in kind. This, he says, helps UEM Sunrise clear “its stock in Johor” where there is an oversupply of high-rise apartments.

“UEM continues to grow its Greater KL land bank and thereby is diversifying away from its traditional stronghold in Iskandar Malaysia,” Nabeel says. And because part of the deal involved a land swap, it aided UEM with the rebalancing of its portfolio.

“The transaction will further expand the industrial development trend at the Tanjung Kupang locality. It also reflects that Johor-based developers are optimistic about the performance of the industrial sector at Iskandar Malaysia,” Tan opines.

Meanwhile, the sale of land in Malaysia Vision Valley (MVV) made it to Ooi’s, Nabeel’s and Siva’s Top 10 property deals list.

In September, Sime Darby Bhd sold 1,282 acres of land in MVV to monetise non-core assets in the Negeri Sembilan-based economic region. This adds to 1,382 acres sold in August. The parcels under both transactions were sold to NS Corp. NS Corp is the government agency responsible for the investment and economic affairs of Negeri Sembilan.

“In the first deal [in August], Matrix Concepts Holdings Bhd acquired 1,382 acres of potential development land from NS Corp for RM460 million while in another deal, NS Corp purchased freehold land parcels of 1,282 acres for RM445 million from Sime Darby to develop an industrial and mixed-use development to be known as NS International Tech Park,” Nabeel says. He elaborates that the industrial and logistics segments are key segments for institutional investors and good quality assets are in demand.

Matrix Concepts set up an 85:15 joint venture with NS Corp to develop the 1,382-acre site while Uni Wall APS Holdings Bhd set up a 70:30 joint venture called NS Aero City Sdn Bhd with NS Corp for the 1,282-acre parcel. However, the latter deal was terminated by NS Corp as NS Aero was unable to pay the purchase deposit.

Ooi picked this deal as it is the “largest land deal in Malaysia in five years in terms of land size”. For Siva, Matrix Concepts’ confidence in building another township in southern Klang Valley reflects the buying pattern of the market, which is the purchase of landed properties further away from the city with decent highway connection.

Several development land and commercial asset transactions were named by at least two property industry experts.

Sunway REIT’s industrial asset acquisition in Sungei Way, Petaling Jaya for RM60.05 million was selected by Ooi and Siva. The asset forms part of the former Western Digital manufacturing site. According to Ooi, this transaction suggests a renewed interest in reviving Sungei Way to its former glory as a key industrial area. Ooi’s firm Knight Frank brokered this deal.

In August, Shanghai Stock Exchange-listed LONGi (Kuching) Sdn Bhd purchased 140 acres of land at UMW High Value Manufacturing Park in Serendah, Selangor for RM304.92 million. “LONGi is the largest producer of solar cells in Malaysia,” Ooi says of the company, which is also the world’s largest manufacturer of monocrystalline silicon wafers.

On this selection, Siva remarks, “Logistics and manufacturing industries continue to defy the odds in a slow property market.”

The other industrial land deal was J&T Express’ purchase of 30 acres of land in Bandar Rimbayu, Teluk Panglima Garang, Selangor for RM600 million from IJM Land Bhd to develop a warehouse facility.

Nabeel considers this deal significant because “J&T is building an integrated logistics centre for express distribution, logistics, transport and warehousing to meet J&T Express’ growing business need.”

For Tan, who points out that the 30-acre industrial land was converted from the previous commercial land title by the developer, this transaction marks the continued growth of the logistics sector in Malaysia.

In the city centre, the sale of the Hakka Restaurant land measuring 3.56 acres on Jalan Raja Chulan did not go unnoticed. It was reported that Loke Wan Yat Realty Sdn Bhd sold the land to a company linked to Tan Sri Desmond Lim Siew Choon. “This land has been rumoured to have not been for sale for decades, until a special interest buyer (Pavilion Group) came in with an offer the vendor couldn’t refuse. The rumoured selling price of RM4,000 psf is one of the highest ever on record in the market, especially for a site of this size,” Nabeel remarks.

For Adzman, the deal marks a “rare opportunity to develop one of the last remaining large prime parcels in Bukit Bintang and to take advantage of Pavilion Mall as a high-end landmark”.

It is worth pointing out that several commercial building transactions received the mention of at least two of the property experts. These include the sale of the KDU Campus and Quill 9 in Petaling Jaya and sale of the Employees Provident Fund (EPF) building in Changkat Raja Chulan.

The former KDU college campus in Damansara Jaya was sold to Sri Nobel education group for RM60 million, which Siva observes is the “first notable educational asset transaction post-pandemic”.

The Quill 9 office block, located along Jalan Professor Khoo Kay Kim in Section 19, was sold by Quill Interior Holdings Sdn Bhd to Neo Platinum Bhd for RM200 million or RM714 psf. “The transaction of this iconic building is significant as it shows that there is still interest coming from the office sector in good locations,” Toh says. According to Tan, the deal is one of the highest transacted prices for a commercial property in Petaling Jaya.

In the capital, the EPF sold its office in Changkat Raja Chulan to AIMS Data Centre Sdn Bhd (Time dotcom Bhd) for RM62 million. Siva says the asset will be repurposed into a data centre and suggests that this could be the beginning of a trend in Kuala Lumpur and other big cities. Siva’s firm Rahim & Co was the exclusive marketing agent for the sale.

There were several interesting transactions, although they received only a single vote.

In Seberang Perai Utara, Ideal United Bintang Bhd bought 834 acres of land. One deal involved 20.35 million sq ft for RM254.6 million and another 15.99 million sq ft for RM220.7 million. The price psf for the total 36.34 million sq ft of land works out to RM13.08 psf. Toh opines that this purchase for the land, zoned for industrial development, demonstrates the positive demand for industrial properties in the northern region of Peninsular Malaysia.

In Bukit Raja, Klang, the EPF invested in the development of a 100% pre-leased logistics hub on 27 acres of freehold land that will be ready in 3Q2024.  The property, which will be equipped with the Automated Storage and Retrieval Systems (ASRS) technology, is being developed in a 70:30 joint venture with Taiwan’s Ally Logistic Property Co Ltd (ALP), and is expected to have an estimated value of RM600 million to RM700 million (based on the gross floor area of 1.8 million).

Nabeel, whose firm Savills executed the deal, says there is an increasing interest in industrial/logistics assets from both foreign and domestic investors but that most existing assets lack automation/ASRS sophistication. “ALP’s entry into the Malaysian market is a positive sign for the sector, as is news of the EPF’s first significant domestic market investment in nearly a decade,” he adds.

Meanwhile, the lease signed by Malayan Banking Bhd for its new head office at Menara Merdeka 118 in 1Q2025 was on Ooi’s list. At 650,000 sq ft of net lettable area, he says, this is the largest pre-lease office deal of the year.

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