informs that the rise in land
costs have made industrial
activity in Selangor
uncompetitive – “Depending
on the location, prices have
soared and has reached up to
RM450 psf in places like Petaling
Jaya.” His advice to investors:
“Look for industrial assets in the
RM250 to RM350 psf range.”
“Shop lot designs haven’t
changed much over the years
but industrial buildings have to
cater to the ever changing
technological landscape.
Investors now have the option of
smaller detached factory units
(25,000 sf) or the semi-D designs
(7,000 to 12,500 sf). Less
expensive options are emerging
with cluster semi-D’s which offer
less land area and are more
affordable, without sacrificing
utility. Many of these products
did not exist 10 years ago.”
Northern and
southern scenario
There are around 200 industrial
hubs inMalaysia; the three most
popular locations are in the
peninsula – Iskandar, Penang and
Selangor. They are considered
the most desired by the fact
that they are supported by a
strong labour pool, have great
infrastructure and are placed
at good locations. Still, of late,
the development of the
industrial market in Selangor
is not flourishing. One of the
reasons is the attractive
offerings in Johor – “the
Shenzhen of Singapore,” as
Labrooy terms it.
Apart from an ample land
supply and prices which are
more reasonable than
Selangor, the initiatives and
incentives and availability of
product within the Iskandar
Region are also far more
exciting. “New parks are being
built to attract multi-nationals,
and at fast timeframes too. In
Selangor, the shortage of
“affordable” industrial space
and the lack of new industrial
parks are hampering decision
making for some multi-
nationals thinking of
expanding in the state.
Selangor should look at
encouraging newmodern
industrial estates to attract
new FDI’s into the state,”
Labrooy remarks.
The CEO spells out the
demands of the typical
industrial or third-party-
logistics (3PL) operator:
•
proximity to major highways
and affordable homes;
•
gated/guarded parks for
enhanced security;
•
clean and green working
L
ast
week we had provided
a basic assessment of the
industrial property as an
asset class and investment
option. This week we are probing
deeper to provide incisive
insights, investment tips and
useful guidelines.
The most vital points
emerging from last week’s article,
is that industrial property cost
less per square foot than other
asset classes. Its security title falls
under the category of landed
assets and industrial property
tenancies tend to be much longer
than that of residential and
commercial lets. Buyers are
normally the tenants themselves,
and it is relatively easier to obtain
financing from banks.
Industrial scope
The Malaysian real estate
market offers property options
in the residential, commercial,
retail, hospitality and ...the less
“popular” industrial segments.
Recently one notices an
increase in the number of
individual investors buying
industrial properties, especially
factories and warehouses.
This is largely due to increased
awareness about three factors:
1) Industrial property rental
incomes are more secure;
2) often much higher than
other asset classes, and
3) the overall returns and
income-yields are
more consistent and
attractive compared to
residential property.
Datuk Stewart Labrooy,
CEO and executive director
of Axis REITManagers Berhad,
shares further insights on
“industrial property as an asset
class investment”. An expert in
this field, he heads the Axis
Group, which has been
specialising in the development
of industrial assets for over 25
years. Today, Axis REIT is among
the largest and most successful
industrial REITs inMalaysia.
“Investing in industrial
properties gives better returns,
and from our experience, much
better returns than houses or
shop lots. For a start, you get a lot
more land for your money in this
asset class,” he says. Labrooy also
Penang’s industrial
estate outlook
Right mix
1) Land prices RM30 psf
– excellent locations
2) Focused one-stop centre
3) Master plans for
industrial estates
4) Batu Kawan adds 6,000
acres for development
5) Has skilled population of
engineers and technicians
6) Wages have been rising
Needs improvement
1) Land is leasehold
2) No turnkey solutions for
manufacturers
3) Estates are not managed
4) Gated & Guarded not
available
5) No worker accommodation
catered for
6) Need to engage with private
developers to speed up the
building of Parks
Diamond
in the Pearl of
the Orient
While
Penang has just about
the right blendwhere industrial
properties are concerned, it has
alsomade a name for itself, as a
sought-after residential developed
area. Improved transportation
links, political stability, a booming
manufacturing sector, not to
mention thriving appreciation in
the price of land.
This ChineseNewYear, take
the opportunity to attend a property
roadshowhighlighting Penang
WorldCity, amixed integrated
waterfront development. A total of
103 acres of land, 68 existing and 35
to be reclaimed, all freehold, will be
developedwithin a span of 10 years.
Learn of the “gems of this product”
– its strategic location, exquisite
development components and
unique selling points of this
finely crafted property
development project.
FromJan 31 to Feb 9, visit
Gurney Plaza’s central atrium
between 10amand 10pm for
more information on this joint-
venture project betweenTropicana
Corporation Berhad and Ivory
Properties Group Berhad. Sign up
and receive a 10%discount + 5%
rebate on on-going projects.
Terms and conditions apply. For
more information, log on to
command premium-rent.
One should also look for the
“Queen Bee” tenant in the
industrial park. It is advisable to
buy upon launch and then work
with the developer and real estate
agents, who specialise in industrial
real estate, to secure tenants.
“SME financing has always been
and still is popular with the banks,
making industrial investments
easier on a market where
residential lending is slowing
down.” He also cautions that
if you decide to buy a product
without seeing it first or checking
the reputation of the developer,
you can still end up in “trouble”.
Caveat Emptor..!
environment as sustainable
parks are becoming
more popular;
•
complete infrastructure on site, as
in power, ample water, broadband
connectivity and piped in gas;
•
modern designs suitable to
current needs and
•
conducive ecosystem for
enhanced productivity and
supply chain management.
Recommendations
and risks
Be aware of what is wanted, what
is offered and knowwhat you are
buying when you decide to enter
the industrial property market,
advises Labrooy. “You need to do
your homework first. Study the
market and understand the
demands. Go for the buy-to-rent
model because the tenant will stay
for a long time and take care of the
property as they invest a huge
amount in equipment and
machines when they move in as
opposed to residential tenants who
are very mobile. The added plus is
that there is a strong likelihood that
eventually the tenant will offer to
buy the property at the prevailing
market price which could give the
investor a handsome capital gain
upon exit,” he says.
Besides the location and the
product offering, other practical
suggestions include the need to
examine the infrastructure. “Check
on the telecommunications, power,
water supply, road conditions, and
access to main highways, ports and
railroads.” Buying Freehold
remains a better option, besides the
preference for “Gated &Guarded”
concepts, which are in favour and
X
X
The German Experience
• Size - 1,052,407 sq ft
• Land Tenure - Freehold
• Grade A building (1,000
lbs/psf Loading superflat)
• Lease 10 years and
automatic Renewal
• Price - 43,000 000 Euros
RM 172,000,000
• Yield - 7.97%
• Cost psf - RM163 psf
• Rent psf RM1.05 psf/
month
Industrial estate
pricing - Malaysia
vs Germany
X
X
The
Malaysian Experience
• Size - from 5,400 sq ft
• Land Tenure - Freehold/
leasehold
• Building grade - variable
• No lease in place - buyer
takes the risk
• Price - RM3,300,000
• Yield - 3% approx
• Cost psf - RM611 psf
• Rent psf RM1.50 psf/
month
>Tips, tricks and traps of investing in industrial real estate
Considering
industrial
real estate
PART2
CUT AND KEEP
JAN 31, 2014
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X
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