This article first appeared in The Edge Malaysia Weekly on March 17, 2025 - March 23, 2025

FROM an investment perspective, structured worker housing is evolving into a stable, income-generating asset class, attracting institutional investors and real estate investment trusts (REITs), with Johor, Selangor and Penang as hotspots, according to a report titled Workers’ Accommodation: The Shift towards Sustainable and Compliant Housing by Zerin Properties Research.

The provision of structured worker housing in Malaysia primarily falls under two categories — centralised labour quarters (CLQs) and purpose-built workers’ accommodation (PBWA). While both serve as dedicated housing solutions, their regulatory requirements, design and operational scope differ, especially under the Workers’ Minimum Standards of Housing and Amenities Act 1990 (Act 446 ).

Among key differences between CLQs and PBWAs are that CLQs are explicitly regulated under Act 446 with strict design and operational standards while PBWAs are regulated under the same act only if it used to house foreign workers. Apart from that, CLQs are typically larger scale with standardised design and space requirements while PBWAs offer a more flexible design, unless it is classified as worker housing, then it must comply with Act 446.

Zerin Properties founder and group CEO Previn Singhe tells The Edge that as industries scale up and labour needs evolve, well-located CLQs and PBWAs present a compelling opportunity for investors seeking sustainable and income-generating real estate assets. “Both CLQs and PBWAs are really emerging as resilient investment segments in Malaysia’s real estate landscape. With stricter regulations on worker housing, environmental, social and governance (ESG) considerations, and a growing demand for compliant, well-managed accommodations, investors are recognising the long-term potential of these asset classes. They offer stable rental yields, institutional-grade tenancy structures and the ability to future-proof investments against regulatory shifts.

“Developers are adopting two main strategies. Some are entering into joint ventures with state governments to integrate CLQs within managed industrial parks — a model embraced in Johor, Penang and Selangor where public-private partnerships streamline approvals and enforce enhanced worker welfare standards. Alternatively, developers are also choosing to build CLQs independently and lease them out through long-term arrangements, including sale and leaseback agreements that attract institutional investors and real estate investment trusts by providing stable rental yields and predictable income streams,” he says.

For example, developer Titijaya Land Bhd (KL:TITIJYA) will build HALO (housing, accommodation and lodging) in Klang Sentral later this year. HALO is a 10-storey purpose-built CLQ designed to accommodate 3,000 workers with completion expected by 2H2026. Titijaya Land secured its first client, Press Metal Aluminium Holdings Bhd (KL:PMETAL), in October 2024, which will rent part of HALO for a minimum of three years, accommodating at least 350 workers.

While specific data on the current supply of PBWAs and CLQs are not readily available, the high occupancy rates of existing facilities (average 90%) suggest a gap between available accommodations and the actual demand, with almost 2.5 million low-skilled foreign workers as at September 2024, according to the report.

Previn says despite the implementation of amended Act 446 in September 2020 and additional emergency ordinances in 2021, compliance with worker housing regulations remains a challenge. “Strengthened enforcement measures, including on-the-spot inspections and penalties, have yet to fully address the issue. Many existing facilities remain non-compliant, as employers have traditionally housed workers in shoplots and residential units lacking proper amenities.”

A 2023 study by the International Organization for Migration reported that Malaysia had 2.7 million registered foreign workers in 2021, many of whom lived in overcrowded and substandard conditions, with cases of 30 to 40 workers sharing a room meant for 10 people.

Separately, CBRE | WTW group managing director Tan Ka Leong tells The Edge that the size of the worker housing market largely depends on its target segment. “If the focus remains solely on foreign workers, the demand may be somewhat limited to sectors like manufacturing, construction and plantations. However, if the concept is expanded to include affordable rental accommodations for local workers, it could be a game changer, particularly given the increasing unaffordability of conventional housing for lower-income groups.”

Johor, a key industrial hub and the state with the second-highest concentration of foreign workers, faces one of the largest gaps in supply, particularly with the implementation of the Johor-Singapore Special Economic Zone (JS-SEZ). “Although new CLQ and PBWA developments are underway, the supply remains insufficient. Even when considering contributions from leading players such as [Singapore’s] Centurion Corp Ltd and AME Group, which collectively provide a total of 25,558 existing beds and an upcoming supply of 11,233 beds, the gap persists.

“Penang, Melaka, Negeri Sembilan and Perak are also addressing this demand by collaborating with private developers and operators to expand CLQ facilities, ensuring better housing solutions for the foreign workforce,” says Previn.

He says that some states have implemented their own requirements to ensure compliance and safety while allowing employers time to adapt, given that the existing supply of PBWAs and CLQs is currently inadequate and workforce demands in each state vary.

According to Zerin Properties Research, the average occupancy rates of these workers’ accommodations due to the compliance with Act 446 are generally above 90% while the average monthly rental per bed ranges from RM180 to RM350 due to factors including location, facilities available and proximity to industrial hubs. The Klang Valley, Johor and Penang command the highest rates, and Johor is also benefiting from demand from Singapore-based companies housing workers in the state.

Tan adds that the leasing period for both CLQs and PBWAs varies depending on the arrangement between the operator and tenant — typically the employer housing their workers. “Arrangements often [vary] from one to two years or more, while larger corporations may opt for longer-term leasing to ensure stability and compliance with the act. Based on our market observations, rental rates for CLQs in Malaysia generally range from RM180 to RM250 per bed, depending on location, facilities and regulatory compliance,” he says.

Centurion, according to its website, is a leading provider of PBWAs in Singapore, Malaysia and China; student accommodation assets in Australia, the UK, the US and China; and build-to-rent assets in China. In Johor, Centurion has 18,088 beds, the state housing 66% of its Malaysian portfolio. In total, Centurion has 27,373 beds with ongoing expansion planned, including adding 1,550 beds by this year in Westlite Senai II and Westlite Johor Tech Park.

In Penang, MyEG Services Bhd (KL:MYEG) subsidiary MyEG Lodging (NC) Sdn Bhd is developing a RM108 million foreign workers’ accommodation in Batu Kawan Industrial Park 3 (BKIP3), which is under a 30-year lease with Penang Development Corporation. The 8.39-acre project features eight five-storey blocks providing housing for 8,000 foreign workers, which will be completed by next year. Centurion completed its first Westlite Accommodation outside of Johor in 2018, called Westlite Bukit Minyak (3,321 beds) in Penang, and in December 2023 entered into a 15-year sale and leaseback agreement with Kumpulan Wang Persaraan (Diperbadankan) (KWAP).

At the same time, KWAP acquired Westlite Tampoi (5,790 beds) in Johor with both of these acquisitions totalling RM227 million.  Centurion manages and operates both properties under a long-term lease.

CBRE | WTW’s Tan expects the CLQ/PBWA segment to grow steadily, driven by stricter enforcement of Act 446, increasing industrial activities and rising ESG commitments. “Demand will remain strong in key industrial regions like Johor, Selangor and Penang, where the manufacturing business is expanding. Developers and investors are showing greater interest, recognising the steady rental income potential in this sector.

“Moving forward, there is an opportunity to broaden the market beyond foreign workers by providing affordable, compliant housing for local workers as well. While the outlook remains positive, its success will depend on proper management, sustainable development and ensuring affordability in line with regulatory requirements,” he says.

He adds that there are opportunities for REITs to explore in the CLQ/PBWA segment, particularly as these assets offer steady rental income due to long-term leasing agreements. “The viability of CLQs as a REIT asset class will depend on several factors, including market demand, regulatory compliance and the ability to secure stable, long-term tenants. Additionally, factors such as location, facilities and adherence to housing standards will play a role in determining the sustainability and attractiveness of such investments.

“While there is potential in this sector, it remains a specialised asset class that requires careful evaluation. Investors looking to explore this asset would need to assess suitable management models to ensure sustainable returns while maintaining compliance with housing standards,” Tan says.

Previn adds that construction and property group AME Elite Consortium Bhd’s (KL:AME) AME-REIT is the only Malaysian REIT with workers’ dormitories. The group’s existing workers’ dormitories in i-Park@indahpura and i-Park@Senai Airport City have a combined total capacity of 6,407 beds and the company is currently building an additional 2,683 beds in i-TechValley@SILC in Iskandar Puteri.

“More REITs and institutional investors are exploring CLQs as an alternative asset class, drawn by stable rental income, high yields and long-term demand. There is heightened interest in Malaysia’s CLQ market as there is strong industrial tenant demand and favourable investment returns. Developers are structuring long-term lease agreements with manufacturers and industrial operators to secure stable income streams from CLQs, enhancing further their appeal as a defensive investment in the real estate sector.” 

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