This article first appeared in City & Country, The Edge Malaysia Weekly on February 19, 2024 - February 25, 2024

This year’s real estate market is not just changing but also evolving, said CBRE | WTW group managing director Tan Ka Leong.

“ESG (enviromental, social and governance) principles are no longer a footnote, but a driving force. From energy-efficient buildings to community-centric spaces, the focus is on creating a future that’s not just profitable, but responsible and sustainable,” he said at CBRE | WTW’s 2024 Malaysia Real Estate Market Outlook report presentation last month.

The event focused on five areas in Malaysia, namely the Klang Valley, Penang, Johor, Sabah and Sarawak. Representatives of the areas revealed that strong activities would bolster the property market in Sarawak, Sabah and Johor, while the Klang Valley and Penang would continue their strong performance.

Creating opportunities

Sarawak’s WTWY managing director Robert Ting Kang Sung highlighted the opportunities the state has to offer, especially in the form of the Pan Borneo Highway.

“The Pan Borneo Highway is already 98% completed and expected to be fully completed and operational by the first quarter of this year,” he said, adding that the better connectivity will open up land for developments such as agricultural farming, cash crops and aqua farming.

“About 50,000ha of land has been identified for paddy farming in Sarawak and Sabah, particularly in the Sri Aman area, with the aim towards food security and self-sufficiency, by the state government.”

In the industrial sector, there is a focus on green fuel, particularly hydrogen and sour gas, with the H2biscus and H2ornbill projects being set up in Bintulu Petchem Industrial Park. In the manufacturing sector, meanwhile, South Korean investors are expanding the state’s copper foil plant in Samajaya Industrial Park, Kuching as well as its polysilicon plant in Samalaju Industrial Park, Bintulu. There are also upcoming mega projects in the form of petrochemical hub Longi and Wenan Steel plant.

Within the larger city urban region, plans are underway to implement the Autonomous Rail Transit (ART) train to increase connectivity from Kuching Sentral to Damai Central in the north. These trains run on hydrogen clean fuel and have a 300-passenger capacity with speeds of 70 kmph. Ting said a trial run started in November last year with the first Kuching-Samarahan line to be completed in 2026.

Furthermore, the Sarawak government has taken over the Rural Air Services and the operations of MASwings flights within the state to ensure affordable and essential flight services and access to rural and remote areas in Sarawak, such as Mulu and Bario.

“With improved air connectivity, there will be more opportunities in trade, business and tourism. MASwings also plans to expand air connectivity to Hong Kong, Singapore, Indonesia and China,” he said.

Eco-tourism is growing in the state, thanks to the state’s rich reserves of flora and fauna. Moreover, Sarawak’s version of Malaysia My Second Home, which is less stringent and more accommodating to participants, grew from 27  participants in 2021 to 700 in 2023.

As for the trends in 2024, Ting believes it will continue to be in the area of ESG, workstyle change and digitalisation.

“We will see more buildings with green features certified by Malaysian Green Technology Corp; we will see reduced carbon footprint; we will see increased awareness by consumers towards a more sustainable environment, living standards and quality of work,” he said.

As for workstyle change, Ting commented on how working from home, online platform meetings and co-working spaces may have an impact on the size, layout and design of office/retail spaces moving forward.

“For digitalisation, in terms of processes, procedures and transactions, all this will help improve productivity through increased speed and efficiency,” he said.

With regard to the other property sectors in Sarawak, Ting highlighted that for the residential sector, demand for landed homes has increased but new supply is lacking. As a result, the secondary market is doing well.

The hotel sector saw a strong revival in 2023, with occupancy rates of more than 50% for 3- to 5-star hotels and average room rates at RM210 per room per night, compared with RM200 per room per night a year ago.

As at November 2023, Sarawak’s tourist arrivals rose 170% year on year totalling 3.5 million, compared with 2.03 million a year earlier.

Ting highlighted that Sarawak is projected to receive four million visitors this year, which brings its tourist numbers back to pre-pandemic levels.

Tourism leads

WTWS director Cornelius Koh presented for Sabah, focusing on Kota Kinabalu. He believes tourism will have an impact on the property market, particularly in the hospitality sector. This is based on data of tourist arrivals, both domestic and international, where in the first 10 months of 2023, there were 2.117 million visitors compared with 232,865 in the first 10 months of 2022. He believes this upward trend will continue.

“For 2024, we are optimistic for tourism, where we anticipate an increase in flight frequency with six additional flights from China. The Sabah tourism minister forecasts 2.8 million visitors this year. I personally believe this is a cautious projection. I feel we can achieve at least three million visitors this year,” he said.

“Last year, we achieved estimated receipts of about RM4.4 billion; the projection for 2024 is RM5.6 billion. It looks very promising. Once tourists come in, the hotel industry will improve, spilling over to other sectors as well as improving job opportunities.”

As for the performance of other property sectors in the state, he highlighted that landed properties fared better compared with high-rises due to the limited new stock coming into the market as land is limited for such developments.

High-rises, however, do not share the same fortune as their landed cousins, as there are still a large number of unsold units since 2022. At the time, there were 3,500 units at various stages of construction and today, 30% are still unsold, he revealed.

“This year, we expect other projects with a total of 5,500 units to be launched; some are already selling and will be completed in the next two to three years. And if we take all of these 5,500 units into account and about 50% are still unsold, we foresee it will be quite a while before they will be absorbed by the market,” he said.

As for the office sector, Koh noted that there has been a trend of office occupiers moving out of the city centre to offices on the outskirts of Kota Kinabalu. This has resulted in city office rentals being reduced by the landlords.

The industrial sector was given a major boost when it was announced last year that the SBH Kibing Solar plant, which will take up 130 acres, and SK Nexilis’ copper foil factory, which will take up 40 acres, will be opening in Kota Kinabalu Industrial Park. Koh said that there is interest to acquire vacant industrial land to design and build their own premises.

Symbiotic growth

Johor’s Iskandar Malaysia’s industrial sector is expected to grow because of data centres, according to CBRE | WTW director Paul Brendan Chan.

“Due to Singapore’s constrained data centre capacity, data centre investors and operators are eyeing to set up their facilities in Iskandar Malaysia, leveraging the availability of land and power supply at lower costs, proximity to Singapore as well as supportive local authorities.

“In line with this, JLand Group announced their expansion plan in May [last year by] introducing a 640-acre data centre park named Sedenak Tech Park 2, which is set to be operational in September 2024,” he said.

This augurs well for the residential sector in Johor as Chan sees it growing, thanks to the high property prices experienced in Singapore.

“Iskandar Malaysia’s residential sector has swiftly rebounded to pre-pandemic levels. Developers and buyers have regained confidence, encouraged by the progress of the Rapid Transit System (RTS) project and the announcement of the [Johor-Singapore] Special Economic Zone.

“The increase in the additional buyer’s stamp duty rate in Singapore may further shift the interest of property buyers and occupants from Singapore to Iskandar Malaysia,” he reckoned.

“Overall, Iskandar Malaysia’s property sector shows an optimistic outlook, fuelled not only by key infrastructure projects but also the positive influence of Singaporeans and Malaysians working across the border. Their strong spending power, fuelled by the robust Singaporean currency, is driving growth for the residential, industrial and data centre sectors.”

ESG driving projects

For the Klang Valley, all property sectors continue to perform steadily with the residential sector, showing how Malaysians are coming around to high-rise living due to land scarcity and affordability, said CBRE | WTW head of research and consulting Mary Kurien.

She highlighted that the main trend impacting all property sectors, however, is ESG.

She pointed to how residential products will incorporate new technology, solar water heating, rainwater harvesting, electric vehicle (EV) charging and so on.

“For offices, flight to quality drives demand for offices. Occupiers, especially MNCs (multinational companies) and financial institutions, will drive demand for ESG-compliant office space and this is in compliance with their corporate objectives,” she said.

For retail, malls are pursuing green certification to offer a mixed lifestyle appeal to consumers as well as incorporating renewable energy features and EV charging stations.

The industrial sector sees the Ministry of Investment, Trade and Industry collaborating with Bank Negara Malaysia, Bursa Malaysia and financial institutions to promote ESG-related financing and funding and attract investment for sustainable projects.

Lastly, hotels are also incorporating green features into their design and operations to appeal to the growing number of eco-conscious travellers.

The growth of the island

For Penang, CBRE | WTW director Peh Seng Yee said: “Catalytic infrastructure projects in the works or in the pipeline would facilitate Penang to sustain its medium- to long-term growth trajectory.”

Penang Silicon Island, a 2,300-acre reclamation project at the southern end of Penang Island, will see the land use divided into 50% industrial, 20% residential and 30% commercial use.

“Penang Silicon Island is set to enhance the appeal of Penang as the ever destination of foreign direct investment, domestic direct investment and tourists,” he said.

The Penang LRT project, which is slated to start construction early this year, is expected to cover about 37km with 23 stations that will connect people to the city centre and also the Penang International Airport.

“There is an opportunity to adopt a transit-oriented development in larger sites in proximity to the LRT stations,” he said.

Furthermore, there is the Penang Airport expansion project, which is expected to commence in September this year, and aims to expand its capacity from 6.5 million a year to 12 million a year. “This expanded capacity will boost the tourism sector, which in turn will augur well for the hotel sector.”

Lastly, the Ayer Itam-Lebuhraya Tun Dr Lim Chong Eu bypass (Package Two) is 35% completed. Besides cutting travel time for those residing in Ayer Itam and Paya Terubong, it will also see new projects being developed and opportunities for higher-range developments.

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