Malaysia’s property market shifts from resilience to relevance

KUALA LUMPUR: Malaysia’s property market is entering 2026 on steadier footing, with growth driven less by volume and more by relevance, quality and sustainability, as economic stability, policy clarity and infrastructure spending reshape investor and occupier priorities.
CBRE WTW group managing director Tan Ka Leong said the market is no longer about broad-based recovery but about how assets adapt to changing demand, particularly in offices, industrial properties and well-located residential developments.
“With GDP growth expected at between 4% and 4.5%, manageable inflation and supportive monetary policy, the fundamentals are there. But what matters now is quality, productivity and long-term value,” he said at launch of CBRE WTW’s Malaysia Real Estate Market Outlook 2026.
Tan noted that residential prices are expected to see only a “reasonable” increase of below 3%, with demand concentrating on well-located and sensibly priced products rather than speculative launches.
Affordability, rather than demand, remains the key constraint, with loan rejections still high despite strong application volumes.
In the commercial segment, ESG compliance has moved from being a competitive edge to a baseline requirement. Ungku Mohd Iskandar Ungku Ismail, managing director of CBRE WTW, said green-certified offices are consistently outperforming older stock, both in occupancy and rental resilience.
“By 2025, over 90% of new office completions were ESG-certified, and this year that figure is closer to 97%,” he said, adding that this is no longer optional as occupiers are prioritising efficiency, sustainability and workplace experience.
CBRE WTW research and consulting director Mary Kurien said the Klang Valley office market continues to show a clear divide between prime and non-prime buildings.
Prime, green-certified offices have seen stronger occupancy and rental performance since 2022, while older buildings are being forced to reposition through refurbishment or alternative uses.
She added that selective conversions from offices to hotels or serviced apartments are likely to continue, supported by incentives and the need to address structural oversupply in certain submarkets.
Ungku Iskandar, meanwhile said the Johor-Singapore Special Economic Zone (JS-SEZ), Forest City Special Financial Zone and the upcoming Johor-Singapore Rapid Transit System (RTS) are strengthening cross-border investment flows.
“Johor recorded a significant jump in approved manufacturing investments last year, making it one of the strongest-performing states,” he said, adding that clarity from the Malaysia-US Reciprocal Trade Agreement is helping investors make more informed, long-term decisions.
CBRE WTW Johor Bahru director Jonathan Lo said demand continues to favour customised, technology-ready industrial facilities, while data centre interest remains strong, although power supply and infrastructure readiness will be critical constraints.
CBRE WTW Penang director Tan Chean Hwa said the state’s strength lies in its deeply entrenched electrical and electronics (E&E) ecosystem, supported by skilled talent, suppliers and decades of manufacturing experience.
“Penang will not compete with Johor on data centres due to power and water constraints,” he said.
“Growth will continue to come from E&E, advanced manufacturing, medical devices and supporting logistics.”
He added that land scarcity on Penang Island is driving industrial expansion to the mainland, with the Penang Silicon Island project playing a strategic role in long-term capacity building.
The state’s tight control over industrial land through the Penang Development Corporation has also limited speculation and preserved industrial relevance.
In East Malaysia, Sabah’s property market is expected to remain stable.
CH William Talhar & Wong Sdn Bhd Sabah managing director Cornelius Koh said demand continues to favour landed residential homes, while oversupply in certain segments has yet to reach critical levels.
“Overhang has increased, but it’s not at crisis point,” he said.
“The bigger issue is affordability and overall economic spending power.”
In Sarawak, infrastructure remains the main catalyst. CH William Talhar Wong & Yeo Sdn Bhd managing director Robert Ting Kang Sung said projects such as the Pan Borneo Highway and Kuching Urban Transportation System (KUTS) are improving accessibility and supporting demand for industrial, logistics and hospitality assets.
He added that density controls and ample land supply have kept prices relatively stable, with future public transport projects expected to unlock further development potential.
Looking ahead, investors are increasingly prioritising income stability over capital appreciation. Tan said institutional investors are focused on assets with strong and predictable cash flow, while speculative, short-term plays are losing appeal.
“Industrial assets, quality offices and select residential locations with strong connectivity will continue to attract interest,” he said.
“The market in 2026 is not about chasing growth at all costs, but about aligning with sustainability, infrastructure and real occupier needs.”
Overall, CBRE WTW expects Malaysia’s property market to remain steady in 2026, with success defined by adaptability rather than scale, marking a shift from resilience to relevance.