Over 1 in 2 Malaysian investors expect healthcare, logistics assets’ capital values to outperform

Thanks to the rising e-commerce penetration rate and the shift towards omnichannel retailing.

According to Knight Frank’s recent Malaysia Commercial Real Estate Investment Sentiment Survey (CREISS) 2021, investors highly favour the logistics and healthcare sectors as they continue to thrive amidst the pandemic. 

More than 50% of survey respondents expect to see a spike in the capital values of healthcare (60%) and logistics (58%) assets. In the office and retail sub-sectors, about half of the respondents expect the capital values to hold while in industrial and institutional segments, the percentages of respondents are higher at 67% and 70% respectively. 

In the hotel / leisure sub-sector, 78% of respondents expect capital values to fall.

Keith Ooi, Deputy Managing Director of Knight Frank Malaysia, said, “It is no surprise that logistics was the clear winner as the preferred sector to continue to do well in 2H2021. The logistics industry in Malaysia has been growing steadily in recent years due to higher e-commerce penetration rate. This, coupled with the structural shift towards omnichannel retailing, has led to an increase in demand for modern warehousing space to meet the surge in last mile delivery. Prime logistics asset values are expected to rise further over the near term underpinned by strong growth in the e-commerce market and again, with interest rate staying low in the foreseeable future, yields are expected to remain at low levels, Keith added.

Industrial / Logistics

The survey respondents have strong convictions on the industrial / logistics sector which they opined should continue to perform well under current economic climate. 

Allan Sim, Executive Director of Capital Markets, Knight Frank Malaysia, commented: “It is understandable that the industrial and logistics sectors are favoured by the respondents as they remain the few resilient property classes that are still up and running during this volatile time. Appropriately, these very same sectors are being voted by respondents to be leaders charting the journey of recovery for the commercial property market.”

“On this note, the survey also highlighted that the ecosystem for industrial and logistics is in unison as developers and fund / REIT managers’ appetite for investments into the industrial / logistics sector are harmoniously complemented by lenders whom are also expressing higher interest in funding these projects / assets”, Sim added.

Sim also commented: “When examining further, we noted that the market is perceiving the impact of MCOs to be more severe for manufacturers that are reliant on human workforce, as compared to logistics that are deemed to encounter less downside risks amidst lockdowns and may even flourish by way of e-commerce substituting general retail. However, attention has to be accorded to the  facet of logistics that are serving the manufacturing sector, of which demand will be subject to the disruption of supply chains on a global scale.”

“All in all, we concur with the respondents’ anticipation for an increase in rental and occupancy rates for the logistics sector. This will act as a strong support for the potential of increase in capital values of logistics assets and further reinforcing the standing of logistic assets class as a darling amongst the investors, fund managers and developers” Sim concluded.

Get the full report here.