PETALING JAYA: The local commercial real estate market is expected to experience a stable and positive environment in 2024 driven by anticipation of foreign direct investment (FDI), stable economy and future developments in the country, said Knight Frank Malaysia.

According to the real estate agency’s Malaysia Commercial Real Estate Investment Sentiment Survey for 2024, it found that, last year, the property market in Malaysia continued to strengthen as evident during the first nine months of 2023, which registered 293,095 transactions with value totalling RM142.5 billion.

It noted that the transactions showed stability in volume, with year-on-year increase of 8.8% in value compared with the first nine months in 2022, which registered 293,115 transactions worth RM131 billion.

Knight Frank Malaysia group managing director Keith Ooi said 2023 showed resilient performance for both the economy and the real estate market, setting the stage for a stable and cautiously optimistic outlook this year.

“The surge in demand for data centres in the Apac region, coupled with growing interest in alternative investments such as serviced residences and industrial parks, underpins the resurgence of the commercial real estate market post-pandemic,” he said in a statement.

The survey also found that 68% of the respondents believe FDI will be more favourable due to better economic conditions.

“FDI in Malaysia is dominated by the manufacturing sector and is expected to continue attracting manufacturing investment to the country due to the availability of an ecosystem and resources. 62% believed that the Business Confidence Index would be positive, attributed to a stable economic environment and anticipated future developments,” he said.

In terms of Budget 2024, 60% of the respondents found it neutral towards the commercial property market.

Amid global challenges, a majority of the respondents expressed optimism about Malaysia's economic performance, digital evolution as well as the real estate market, driven by factors such as a resilient labour market and positive consumer sentiments. The favourable outlook on political stability further contributes to enhanced investor confidence on both domestic and international fronts.

Meanwhile, research and consultancy executive director Amy Wong noted that respondents predicted a positive increase in investments into the retail, healthcare and educational/institutional sub-sectors in 2024.

However, minimal interest is observed in the office and industrial/logistics sub-sectors, while the hotel/leisure sector maintains a trend similar to that of 2023.

“A look into respondents’ views on the investment landscape from 2024 to 2026 reveals a keen interest in serviced residences/hotels, particularly in established areas like Klang Valley, Penang and Sabah, driven by increased tourism and a resurgence in the hotel industry post-pandemic.

“Industrial/business parks, especially in regions like Klang Valley, Penang and Johor, are attracting investors exploring opportunities in logistics and industrial hubs amid the rise of the digital economy,” she remarked.

Furthermore, she said, that there is growing preference for alternative investments, with notable interest in sectors like co-living/student accommodation, co-working/flexible office spaces, as well as the data centre industry, reflecting evolving trends in work preferences and technological advancements.