Why Malaysia’s industrial property sector remains resilient amidst supply chain shifts

The country proves to be  an attractive destination for exporters and manufacturers.

Malaysia’s logistics and industrial property sector had a steady momentum amid shifting regional supply chain dynamics, according to Knight Frank’s Asia-Pacific Logistics Highlights H1 2025 report.

While logistics rents across Asia-Pacific fell marginally by 0.4% year-on-year in the first half of 2025, the first decline since the pandemic, Malaysia’s logistics hubs have demonstrated resilience, buoyed by their strategic locations and evolving role within the broader regional ecosystem.

However, given the recent announcement of the reduction in the reciprocal tariff by US government from 25% to 19%, it is anticipated that the logistics sector would experience a positive outlook in the second half of the 2025, especially warehouses nearer to the seaports. In addition, the government’s recent initiatives — including cash aid, petrol subsidies, and an increase in the minimum wage to ease the rising cost of living — may help spur consumer spending in the second half of the year, particularly on fast-moving consumer goods (FMCG), which in turn is expected to drive demand for logistics and warehouse space.

“Malaysia’s participation in key trade agreements like RCEP and CPTPP has already positioned the country as an attractive destination for exporters and manufacturers, particularly with the benefit of lower intra-regional tariffs,” said Chelwin Soo, Director of Land & Industrial Solutions at Knight Frank Malaysia. “The recent tariff adjustments by the U.S. only add momentum to the ongoing shift in global manufacturing strategies, with many players now diversifying into Southeast Asian markets like Malaysia that offer competitive positioning and ease of trade.”

Malaysia’s Strategic Position and Market Outlook

Malaysia’s strategic position within Southeast Asia and its connectivity to key regional hubs underpin this selective demand. Malaysia is increasingly benefiting from global supply chain shifts under the “China+1”, “Taiwan+1”, “Asia+1”, and even “Singapore+1” strategies, as manufacturers operators seek to diversify risk, lower costs, and expand regionally.

“Malaysia’s strategic location, cost competitiveness, and favourable tariff structure — especially when compared to China — make it a logical choice for companies looking to realign their operations across Asia,” said Allan Sim, Senior Executive Director of Land & Industrial Solutions at Knight Frank Malaysia. “We’re seeing rising interest from Chinese manufacturers aiming to either establish or expand their presence in Malaysia, which translates into stronger demand for industrial space, particularly in warehousing space."