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As more investments shift to manufacturing, the industrial market is starting to dominate Iskandar Malaysia’s property landscape.
By Nikki De Guzman
Besides its proximity to Singapore, Iskandar Malaysia has become popular among foreign investors –particularly Singaporeans – because of its housing market that tends to offer more affordable investment options compared to those at home.
But apart from the residential segment, another property sector – industrial – has been driving the growth of Iskandar Malaysia and has, over the years, overtaken the housing market as the largest contributor of committed investment in the economic zone.
In this issue, we examine the industrial property segment in Iskandar Malaysia and shed light on the market that is gaining popularity in the investment destination across the causeway.
Building optimism
When Iskandar Malaysia was first conceptualised in 2006 – with the aim of addressing the declining inflow of foreign investments and the outflow of human capital, and at the same time turning the country into a developed-nation – the plan did not exactly receive much optimism. Iskandar Malaysia was off to a slow start.
But when the Malaysian government committed significant investments to improve infrastructure and develop catalytic projects, investors’ confidence then turned positive.
Fast-forward to 2010, when the land swap deal – led by both the Singaporean and Malaysian governments – was concluded, Singaporeans began snapping up properties just across the causeway, pushing demand up to record levels and attracting more investment to the property market, noted property expert Khalil Adis of Khalil Adis Consultancy.
Foreign investment
Last year, Malaysia’s total approved investments grew 38 percent from RM52.1 billion (S$ 17.39 billion) in 2013, to RM71.9 billion (S$ 23.99 billion). Of this, a total of RM3.6 billion (S$ 1.2 billion) went to Iskandar Malaysia, and based on MIDA’s data, out of the total investments in Iskandar, 50.5 percent were contributed by foreign investors while the rest were local investments.
And as more foreign investors look to Iskandar, experts believe that the region’s cumulative committed investment is expected to grow further this year.
This was true when the region recorded an RM14.38 billion (S$ 4.8 billion) committed investments in the period between January and June 2015 alone. The registered amount brought the total cumulative investments in Iskandar Malaysia to RM172.51 billion for the period of 2006 to June this year, with a realisation of 50 percent, according to Savills’ Asian Cities report citing Iskandar Regional Development Authority’s (IRDA) data. (Refer to Figure 1)
Manufacturing, which is one of the main drivers of the economic zone’s industrial property segment, rose as the largest contributor of committed investments at 30 percent or RM51.56 billion (S$ 17.21 billion).
Notably, Singapore – which has remained the largest foreign investor in Iskandar Malaysia over the years – allocated most of its total investment of RM14.68 billion (S$ 4.9 billion) to the manufacturing segment. This is a clear sign that the industrial property segment in Iskandar Malaysia has gained momentum.
From residential to industrial
Iskandar Malaysia’s transformation has been most evident in recent years. Thanks to its popularity among foreign investors, especially those from Singapore, demand for real estate in Iskandar Malaysia has grown significantly through the years.
But before the industrial property market got a share of the limelight, investors—both local and from overseas —focused their attention on residential properties for investment. However, after the announcement of property cooling measures in the 2014 Malaysian Budget, and the flurry of project launches by Chinese developers following a series of aggressive land-banking activities, buying activity in Iskandar’s residential segment admittedly became less robust than before.
While Singaporeans continue to look to Iskandar for residential properties, investors have also begun looking for other investment opportunities in the highly sought-after property market there.
Spill-over effect
As domestic pressures such as the foreign labour crunch and rising rental and overall business costs begin to weigh down on businesses here, companies, whether existing or new, have started to reconsider their business and operations strategies to be more cost-efficient.
Alpha Marketing founder and director Ryan Khoo said: “There is an on-going migration of Singapore based manufacturers to Johor due to its proximity and lower costs. And these are not necessarily (just) Singaporean companies but (also) Japanese, Taiwanese, Europeans (that) are constrained from expanding in Singapore. (They then) go to the next best thing which is Johor. Malaysia, in general, is still a fairly attractive industrial choice due to the ease of doing business, educated workforce and decent cost base.”
In a report by Ernst and Young in February 2014, it noted that Iskandar Malaysia has a high upside potential compared to more developed areas in Malaysia due to its unique location at the intersection of two countries. “It offers land area, natural resources and infrastructure for more new development opportunities.”
Khoo added, “While the trend of Singapore manufacturers setting up in Iskandar Malaysia is not new, we are seeing bigger names come in, and their success will raise confidence and attract others to come in.”
According to a report by C H Willams Talhar & Wong about the industrial property market in Johor Bahru, the steadily increasing demand for industrial properties in Iskandar, particularly in Nusajaya, which continues to be the most sought-after area since 2014, was prompted by new developments springing up in the area. These include Nusajaya Tech Park and Tropicana Business Park.
Singapore developer Ascendas Group entered into a 60:40 joint venture with Malaysia’s UEM Sunrise to build a 337-acre tech-focused industrial estate, Nusajaya Tech Park, which is due for completion by 2023. This development will feature two-storey semi-detached and detached factories in the first phase, which will be launched before the end of the year. “The opening of its tech park in December 2015 will be momentous for both Singapore and Iskandar Malaysia. Several MNCs that have signed on with Nusajaya Tech Park will be unveiled then, and this will boost the confidence of those who are still unconvinced,” Khoo said.
Meanwhile, Tropicana Business Park will span about 300 acres and will feature 72 units of 2 1/2 –storey terraced and semi-detached factories that are to be completed in the next two to three years.
An aerial shot of Nusajaya, one of Iskandar Malaysia’s sought-after flagship zones for industrial properties. (Source: Khalil Adis)
Forward and upward
Iskandar Malaysia’s industrial expansion is expected to steadily creep upwards on to land where palm oil plantations dominate the landscape. In a report by the Financial Times, it noted that last year, UEM Sunrise entered a $229-million land swap deal with plantation company Kuala Lumpur Kepong to secure 1,012ha of agricultural land to the north of Senai, allocated for future projects once Nusajaya is fully developed by 2030.
“We are quite positive on industrial property in Iskandar,” said Khoo. “As the record industrial investments get spent on the ground in the next three years or so, this outlook will get clearer to the general public. Singapore manufacturing is shrinking, but Iskandar’s is reaching new heights.”
Adis concurred, adding that strong government support helps in boosting confidence in the industrial segment in Iskandar. “The industrial property sector looks promising because of the recent agreement during the Singapore-Malaysia Leaders’ Retreat 2015 where both prime ministers agreed to attract more SMEs and MNCs in the manufacturing sector from Singapore to invest in Iskandar Malaysia.”
“Due to the strong government-to-government support, this will be a confidence booster in the industrial property market,” said Adis.
With that, keen interest and involvement from Singapore is expected to flourish, especially on the back of continued warm bilateral ties between the two nations and strengthening economic linkages.
“Outside of the property sector, the Iskandar economy is very healthy and that will encourage the organic growth to build for the next growth spurt when the cycle recovers,” Khoo added.
i-Parc@Tanjung Pelepas
Kawasan Perindustrian Tanjung Pelepas
Type: Industrial Park
Developer: Mah Sing Properties
Nearby Amenities: Port and marine services, hi-tech manufacturing, food production
Operational Date: Early 2016
The freehold 210-acre i-Parc@Tanjung Pelepas industrial park features 4-in-1 centralized function properties comprising a showroom, corporate office, warehouse and factory, offering flexibility for contemporary SMEs and other businesses.
The latest edition to Mah Sing’s premium corporate factory series, i-Parc consists of 474 units including eight industrial land parcels, one petrol land and one commercial plot. Industrial land parcels come with land areas ranging from 0.952 acres to 1.48 acres, while the petrol land and the commercial plot measure 0.95 acres and 0.81 acres respectively.
Located just 1km from the Port of Tanjung Pelepas (PTP) and within proximity to Nusajaya’s key amenities, i-Parc is 5.5km to the Customs, Immigration & Quarantine (CIQ) facility and is accessible via a comprehensive network of highways. Nearby amenities include port and marine services, warehousing, logistics, engineering, hi-tech manufacturing, food production, petrochemical industries and entrepot trade.
Now fully completed, operations at i-Parc@Tanjung Pelepas are expected to commence in early 2016.
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