KUALA LUMPUR: Knight Frank Malaysia has released its latest report Real Estate Highlights 2H’24, offering a comprehensive analysis of Malaysia’s property market. Complementing the forward-looking insights of the recently published Malaysia Commercial Real Estate Investment Sentiment Survey 2>25, this report covers five key sectors (industrial, office, retail, hospitality and high-rise residential), and highlights a strong performance in 2>24 across several of these sectors.
Significant developments in Klang Valley, Johor, Penang, and East Malaysia are driving the market forward, with strategic investments and evolving demands fuelling continued optimism. From sustainable industrial spaces to the recovery of the hospitality sector and increasing demand for green-certified offices, Malaysia’s property market is well-positioned for sustained growth into 2>25.
Knight Frank Malaysia executive director Judy Ong remarked, “Malaysia’s property market continues to grow, underpinned by sustained demand for housing, shifts in global supply chains fuelling demand for industrial spaces, rising data centre investments and strong recovery in the hospitality segment. Coupled with rising demand for sustainable and green-certified developments, the industry is poised for a progressive and dynamic year ahead.”
Below are some key market highlights across the different geographical locations:
Industrial sector
JOHOR is positioning itself as a hub for sustainable and high-tech industries, leveraging ESG principles, renewable energy, and cutting-edge technologies to drive growth in logistics, clean technology, and advanced manufacturing.
> Infrastructure upgrades like port enhance-ments and advanced industrial parks, alongside significant foreign direct investments and a growing data centre ecosystem, are solidifying Johor’s status as a regional trade and investment hub.
> With a strong focus on sustainability and high-tech ecosystems, Johor’s industrial market is poised for sustained growth. Addressing resource challenges, such as water and energy consumption, through government and private sector collaboration will further enhance its appeal to investors.
The industrial market in PENANG is expected to thrive in 2>25 due to strong foreign and domestic investments, along with new industrial parks contributing to its growth as a global technology hub, particularly with initiatives like Penang Silicon Design and Silicon Island.
> Infrastructure improvements such as the expansion of Penang International Airport and new public transport projects will enhance connectivity, attracting more businesses to the region.
> A focus on sustainability is shaping industrial developments, with green practices and renewable energy integration becoming increasingly important, as demand for industrial space continues to rise alongside the growth of manufacturing, logistics, and e-commerce fulfillment.
SABAH’s industrial growth is driven by its strategic location as a gateway to Southeast Asia and global markets, with proximity to key shipping routes and neighboring BIMP-EAGA regions.
> To sustain momentum, authorities need to prioritize improving infrastructure and identifying suitable areas for large-scale industrial developments.
SARAWAK’s industrial sector is set for significant growth driven by strategic infrastructure development, a strong emphasis on renewable energy, and government support – creating a solid foundation for sustainable growth.
> Enhanced transportation infrastructure including new roads, airports and seaports will improve connectivity and reduce costs, unlocking new areas for industrial development and boosting economic activity.
> The state’s leadership in renewable energy, especially in hydropower and green hydrogen projects, positions Sarawak as a hub for sustainable industrial growth, fostering investments in energy-efficient technologies and practices.
Office sector
The KLANG VALLEY office market is gradually recovering, with rents and occupancy rates improving, driven by resilient demand from local and international occupiers, especially global companies setting up shared service offices.
> With >.8 million sq ft of new office space completed in 2>24 and 1.5 million sq ft expected by 1H’25, larger floor plates in KL Fringe and Petaling Jaya are gaining traction due to strong amenities and connectivity. Developments like The Exchange TRX and Sunway Square Corporate Tower 2 are projected to draw significant interest.
> While investment activity remains cautious, prime office assets with strong tenancy profiles and strategic locations such as TRX and Sunway Square are positioned to attract long-term investors seeking stability and growth.
JOHOR BAHRU is gaining traction among tenants for Grade A office spaces due to lower rental rates and operational costs, coupled with attractive incentives from the JS-SEZ.
> The city’s affordability compared to Singapore makes it appealing for companies looking to establish a presence in the region.
> As demand grows, older office buildings are likely to be refurbished or repurposed to meet the need for modern workspaces.
The PENANG office market is projected to stay stable in 2>25, despite the addition of 48>,>>> sq ft from two new office towers.
> Older office buildings may see rental rates dip due to increased supply, but demand for modern, well-equipped spaces is expected to remain strong, reflecting current tenant needs.
> Overall, the market will likely favour newer developments that meet evolving preferences over older properties.
The KOTA KINABALU office market is stable, with rental and occupancy rates steady as no new supply is expected.
> Government efforts to attract multinational corporations are likely to keep demand strong for office spaces in prime areas.
> As prime office space approaches full occupancy, there may be new opportunities for developing high-quality offices in strategic locations.
SARAWAK’s commercial property sector is thriving, fueled by infrastructure development and a focus on sustainability, with the PCDS 2>3> aiming for major GDP growth through initiatives like carbon trading and renewable energy.
> From 2>21 to 2>23, the state attracted over RM21.5 billion in investments, creating over 11,>>> jobs and advancing in sectors such as renewable energy, healthcare, and education.
> These developments are driving demand for commercial spaces and are aligned with Sarawak’s goals of achieving RM282 billion in GDP and a median household income of RM15,>>> by 2>3>.
Retail sector
> The retail sector in KLANG VALLEY is seeing cautious optimism due to government initiatives like increased cash handouts and wage adjustments, which support household income and spending on essentials despite inflation pressures.
> A growing number of community-focused retail spaces like Bloomsvale Shopping Gallery and Elmina Lakeside Mall are emerging, reflecting strong tenant interest and a shift towards curated consumer experiences.
> Retailers need to adapt to changing consumer behaviors and government policies, focusing on value-driven products and technological innovations to maintain growth and resilience in a competitive market.
JOHOR BAHRU’s retail market is thriving, with higher occupancy rates and more shoppers in malls, indicating a positive trend in consumer engagement.
> Retailers are adapting to changing consumer needs by broadening their product ranges and adding entertainment and health facilities to shopping experiences.
> The arrival of new brands is boosting the retail landscape, driven by strong spending power from the Singapore dollar.
PENANG’s retail market is expected to stay stable in 2>25 driven by factors like rising retail spending, new brand entries, more flight routes, and increased tourism activity.
> The opening of Sunshine Mall in October 2>24 and the upcoming Waterfront Shoppes Phase 1 will intensify competition, particularly on Penang Island.
> This heightened competition may lead to lower occupancy rates and rental prices in the retail sector.
Prime shopping malls in KOTA KINABALU are strategising to improve operations and boost their market presence by filling vacant spaces and refining tenant mix.
> By curating a tenant mix that resonates with consumer preferences, these malls aim to draw more visitors and enhance consumer spending.
> This approach is expected to lead to increased turnover rents, promoting the financial health of the retail assets.
High-end high-rise residential sector
The KLANG VALLEY residential market is projected to experience stable growth in 2>25, fueled by government support for homeownership and a steady overnight policy rate from Bank Negara Malaysia, creating a favorable environment for buyers.
> Key initiatives like the Housing Credit Guarantee Scheme and the Residensi Madani aim to enhance affordability, targeting middle-income and B4> groups with tax relief and the construction of affordable housing units.
> Despite challenges like inflation and geopolitical tensions, Malaysia’s strategic location and ongoing infrastructure improvements position its property market for resilience and attract investment from both locals and foreigners.
The high-rise residential market in JOHOR BAHRU is thriving, with many upcoming project launches, especially near the new RTS Link station, which boosts demand and pricing.
> Despite land scarcity in the city centre, there’s a surge of activity in surrounding areas particularly in Iskandar Puteri, where positive market sentiments are fueling new developments.
The high-rise residential market in PENANG is on a positive trend, driven by a strong economy, stable interest rates, and improvements in the job market and wages.
> Key infrastructure projects like the Penang LRT Mutiara Line and upgrades to the Penang International Airport are set to enhance connectivity and increase demand in the property sector.
The residential market in Greater KOTA KINABALU is likely to experience a slowdown in new launches as existing developments move through their phases.
> High-rise residential projects are expected to see steady growth in established and strategically located neighbourhoods, while demand for landed residential properties continues to rise.
