The independent global property consultancy, Knight Frank Malaysia released its Asia-Pacific Warehouse Review on prime warehouse rents across 17 key cities, registering an average change of -0.02% half-on-half despite Covid-19. Going forward, Knight Frank expects average rental growth between 3% and 5% by the end of 2020.
“The outlook for industrial markets remains resilient due to robust demand from the e-commerce and essential goods sectors, as well as additional requirements for inventory storage to mitigate supply chain disconnects,” said Tim Armstrong, head of occupier services & commercial agency, Asia Pacific at Knight Frank.
Asia-Pacific Prime Warehouse Rents:
|City||USD/sq m/month||6-month % change (H2 2019 – H1 2020)||Forecast next 12 months|
Source: Knight Frank Research / *Sanko Estate
Knight Frank Malaysia capital markets executive director Allan Sim said in the ASEAN context, Klang Valley remains attractive in terms of warehouse rental competitiveness.
“Combined with our integrated ecosystem of accessible skilled labour and talent as well as investor-friendly policies with favourable tax structures and attractive government incentives, this helps to put Malaysia at a competitive advantage amongst its neighbours in attracting multinational businesses that are diversifying their global supply chain and manufacturing operations to the region.”
Covid-19 gives rise to acceleration of “China Plus One” strategy adoption
“Multinational corporations (MNCs) have been looking to diversify their supply chains out of China over the past few years due to growing trade tensions between the US and China as well as rising labour cost in China.
“More recently, the unprecedented disruptions arising from the Covid-19 pandemic, further highlighted the risk of being over-reliant in managing and operating the supply chain out of a single country – China.
“For many MNCs, the pandemic has become the deciding factor to adopt the “China plus One” approach to supply chain management – by diversifying portions of the supply chain to other regional countries whilst maintaining higher value manufacturing operations in China with adoption of digital transformation and automation. ASEAN countries are the immediate beneficiaries of this supply chain redesign,” added.
Malaysia as preferred investment destination amongst ASEAN countries
According to Sim, the various incentives unveiled under the RM35 billion short-term Economic Recovery Plan (Penjana) will help encourage more foreign direct investment (FDIs) flows.
“There is a generous tax holiday period of up to 15 years for foreign companies making new investments in the manufacturing sector with capital investments of RM500 million and above.
“This coupled with the fast track approval mechanism for manufacturing licences and tax incentives with the establishment of Project Acceleration and Coordination (PACU) in the Malaysian Investment Development Authority (MIDA), will help to raise the country’s attractiveness in the eyes of foreign investors.”
He added, with these timely incentives combined with competitive real estate and labour costs, Malaysia will be positioned as one of the main beneficiaries amongst our ASEAN counterparts, in capturing the shoring of manufacturing and supply chain operations amidst the on-going restructuring of global supply chains.
“We will also likely to witness a positive spill-over effect in other segments of the industrial property market predominantly in larger purpose-built factories / large tracts of industrial lands, with the potential entry / relocation of new global industrial players.”