2013 ISSUE 2
Buy now! Do not speculate the current property price and adopt a wait and see attitude -- Nixon Paul
THE MALAYSIAN RESIDENTIAL PROPERTY MARKET
FOUR SEASONS TO OPEN IN KL
MALAYSIA RANKS 6TH IN BLOOMBERG’S
FACILITATING & PROMOTING INVESTMENT FOR MALAYSIAN REAL ESTATE
Greater KL ......
A RESILIENT OUTLOOK FOR INDUSTRIAL SECTOR SPECIAL REPORT
INVESTMENT READ MORE
IMPACT OF HIGH SPEED RAIL (SINGAPORE-KL)
POTENTIAL FOR HEALTHCARE REITs IN MALAYSIA
RETAIL SECTOR UPDATES 2008-2012
LIST OF INVESTOR REQUEST (UPDATED)
OUTLOOK FOR INDUSTRIAL SECTOR The GKL’s industrial sector appears to be the new hotspot for regional players by Hazrul Izwan
Figure 1: Industrial Areas in Greater Kuala Lumpur Rawang
Amidst a mixed global outlook caused by a slight drop in world output in 2012 (5.3%) compared with 3.2% in 2010, the Malaysian manufacturing sector was able to make a strong contribution of about 24.6% to GDP after the services sector (50.6%) in 2012. GKL is the key area: The Greater Kuala Lumpur (Selangor and Kuala Lumpur) is the largest contributor to country’s manufacturing sector. For investor, industrial properties one of growing portfolio of investments in Malaysia. On the supply side, the GKL industrial market was experiencing a shortage caused by limited industrial land in Kuala Lumpur and some areas in Selangor. In tandem with the shortage issue and escalation of prime industrial land prices between 14% and 30%, there is growing demand for Malaysia industrial property assets in the portfolio of investors. These industrial properties are largely found in GKL. Based on National Property Information Centre’s (NAPIC) half yearly report, the 5-year average transactions of industrial properties in Malaysia consistently registers 9,000 units every year of which 19% are located in Kuala Lumpur and Selangor. According to MPI Research, Greater KL is
Sg.Buloh Kota Kemuning
Klang North, Klang South/ Port Klang
Albeit the global economy enters a fragmented recovery, the Asian region continuously recorded a favourable economic growth in most of the countries including Malaysia. Malaysia’s economic outlook is forecasted to remain robust in years ahead as evidenced by the official recent announcement of real GDP growth of 5.6% in 2012.
Sg. Besi Cheras Seri Kembangan
Subang Old Klang Puchong
Greater Kuala Lumpur is the largest contributor to country’s
Balakong Kuala Langat Semenyih Bangi Kajang Source: MPI Research
line with Malaysia’s Top 10 ranking in the A.T Kearney FDI Confidence Index 2012.
Key opportunities: According to Anthony Chua, executive director of KGV Property International, a possible solution may be the reintroduction of flatted factories as no new ones were built in past 10 years. sector makes A recent survey by us on two flatted its industrial factories in Kuala Lumpur and another three in Petaling Jaya revealed that properties one of occupancy is almost 100%. “An improved growing portfolio of version of these flatted factories with better design and facilities are likely to investments attract the interest of manufacturers and retailers who want to keep their operation or stock close to their business locations”, forecasted to have an insignificant decline he added. in transactions in 2012 compared with the previous year due to the substantial The design and facilities improvement increase of between 15% and 56% in might have positive side effects since average price per unit between 2H’11 and multinationals, manufacturers, retailers 1H’12. and supply chain companies need to comply with their company’s standard. Even though the price seems to escalate Taking Cyberjaya (GKL South) as an rapidly, the increment shows that the example, this area has evolved from a industrial properties typically buildings and command centre to be the global services industrial lands have increasing potential hub offering business process outsourcing as an alternative real estate investment (BPO) to the world. Ranked third by A.T opportunity for investors in 2013. Kearney Global Services Location Index after India and China for eight years in a Regional manufacturers exploring new row since 2004. This gives the country’s growth opportunities beyond China and industrial property a new breath. India has resulted in a strong resurgence in the industrial property sector. This is in (continued next page)
Factbox! Prices of factories in Selected Location of Klang Valley (1H’12)
1 1/2 - Storey terraced
and retailers who want to keep their operation close to their business - Anthony Chua
Figure 2: Industrial/ Distribution Property Buy/Hold/Sell Recommendation by City
-2 ina Ch
k i r la e ta ur inh jing por okyo ani ngko Tie akar ngha mp a M T i M Bei J a Lu Ba ing Ch Sh ala S o H Ku
Park, Kepong Taman Industrial SP
2 - storey terraced
Jaya, Sg Buloh Meru Industrial Park,
Avg. Price Change (%) (1H’11 / 1H’12)
Prices of prime vacant industrial land in Klang Valley (RM psf)
Sec.23 Shah Alam
Source: VPC Research
Taman Ehsan Industrial
2 - storey terraced
An improved version of flatted factories with better design and facilities are likely to attract
Source: The Emerging Trends in Real Estate Asia Pacific 2013 Report, July 2012
(from previous page) The regional hotspot: Regionally, GKL’s industrial sector had received a strong positive indication recently – it’s ranked in the Top 4 after China (second tier cities), Jakarta and Shanghai and ahead of Beijing, Singapore and Bangkok in the ULI/PwC Survey 2013. The good news for investors is it received the lowest “SELL” recommendations from investors and is
categorised in the “very attractive” market and the Mercer Quality of Living Survey to invest in 2013. 2011 respectively ahead of Bangkok, Manila, Jakarta and Hanoi. Progressively, GKL will overcome China (second tier cities) and Shanghai as In a nutshell: A special task force led Chinese labour become more expensive by the government investment agencies for many industries.This could leads to the such as Ministry of International Trade and withdrawal of investments form China. Industry (MITI) and Malaysian Investment The main ASEAN cities especially GKL is Development Authority (MIDA) together benefiting from the spill-over effects from with InvestKL, Selangor State Investment the withdrawal of investment from China Centre (SSIC) and Talent Corporation are and further attract more investments into needed to streamline and fine-tune GKL to the country. be the next industrial hotspots regionally. In spite of this, Jakarta is GKL’s the closest competitor as it is the second highest FDI recipient after Singapore. It is the matter of how we compete or compliment in each other.
Malaysia makes a right move to invest in the soft part of it through Economic Transformation Programme (ETP) introducing many strategies to create business enablers. The contributions from developers are crucial as well to provide a The competitive strengths: Shortage of good hardware. human talent and rising wages are crucial to a country’s competitive edge. However, Therefore, Malaysian developers are GKL outranks the rest of the ASEAN-5 keen to tap renewed investor interest cities or countries carries the Malaysia’s in land acquisition or joint-venture as ranks in terms of competitiveness, investor well as knowledge-transfer in building protection and talent. technologies for their industrial component inside the property development projects, Apart from these rankings, GKL also enjoys betting that Greater Kuala Lumpur’s a high standard of living and is ranked 77th regional hotspot status will help to boost out of 140 cities and 76th out of 221 cities the other sector’s market. by the EIU Global Liveability Survey 2012
HIGH SPEED RAIL IN MALAYSIA by Veena Loh The announcement of the High Speed Rail (HSR) by the two leaders from Malaysia and Singapore after their fourth annual retreat in Singapore on 18 to 19 February 2013, signifies a new level of trust and shared mutual understanding that the undertaking will bring about growth that is beneficial to both countries. The proposed high speed rail between KL and Singapore will cut traveling time by car from five hours to only 90 minutes. Politically, it is seen as a positive move as both countries have agreed to work more closely together, thereby increasing friendlier relations and promoting greater economic ties.
not only attracts Singaporeans investors, foreign visitors will now view Kuala Lumpur or Singapore differently; possibly as one destination
Impact on tourism industry From the Malaysian point of view, 9.7 million Singaporean tourists form the biggest portion (40%) of the total 25 million tourist arrivals in 2012. In contrast, Singapore receives only 11 to 12 million tourists each year. Malaysians form the third largest number of tourists after According to a survey by Ernst & Young Indonesia and China. among 600 business executives, again Malaysia features as the most significant Not only will the improved connectivity international business locations for attract Singaporean visitors, foreign S i n g a p o r e c o m p a n i e s w i t h 5 4 % visitors will now view Kuala Lumpur or respondents picking Malaysia as their Singapore differently; possibly as one preferred business location. destination. Travel agents will package holidays that combine both countries Complementing Singapore on the and foreigners will consider traveling to Asian map as a successful and thriving both countries since traveling between conventional financial centre, Malaysia both cities will be seamless. Malaysia will will serve a niche market as an innovative receive more of the high net worth visitors global Islamic financial centre. Malaysia is from Singapore. This is aligned with after all, the world’s largest issuer of sukuk Malaysia’s ambition to move its services bonds that is widely accepted by Middleinto higher value-added ones. Eastern countries. Inflow of FDI Malaysia has also been the biggest recipient of Singapore’s outflow of Foreign Direct Investments (FDI) and with the improved connectivity, this will rise further. With the completion of the HSR by 2020, Singapore’s FDI outflow will reach US$38.6b.
Impact on real estate Higher tourist and business visitor arrivals will have medium to long term implications for retail space, retail operators, hotels and hotel operators as well as commercial office space. Higher prices may encourage developers to rebuild some of the older city of KL. If the HSR starting from the Tun
The potential bullet train type for the High Speed Rail project connecting Singapore and Kuala Lumpur
Razak Exchange (TRX) is well planned and executed, the land area around the TRX may rival or overshadow the KLCC area which is 15 minutes driving distance away. Higher business and tourist arrivals will lift prices of hotels, increase businesses of restaurants and recreational activities in the area. Better connectivity also increases the demand for residential properties, especially for holiday retreats for occupation by Singaporeans and expatriates. In a recent survey by iProperty conducted among 2,099 Singaporeans, 42% chose Malaysia as the number one destination for overseas real estate investment. Countries set up a committee to cooperate on new links A Joint Ministerial Committee has been set up to overlook the planning and execution of the HSR, targeted for completion by 2020 and also to explore further new links to improve connectivity between the two countries. Besides the HSR link, the leaders also agreed to strengthen connectivity through the Rapid Transit System Link between Woodlands and Johor Bahru. The JMC will also study measures to address traffic congestion issues on the Causeway as well as the feasibility of a third road link between the two countries. For sea connectivity will also improve in 2013 with a proposed new Custom & Immigration Quarantine Complex (CIQ) facility at the Puteri Harbour in the Iskandar Malaysia. A more leisurely type of ferry services will operate between Puteri Harbour and Singapore.
RESIDENTIAL PROPERTY MARKET Stable outlook in 2013 for the sector as demand remains strong from investors
by Hazrul Izwan Nixon Paul is currently the President of Malaysian Institute of Estate Agents (MIEA). MIEA is a non-profit association which represents registered real estate agents in Malaysia. It is headquartered in Kuala Lumpur with another five states branches located in Johor, Penang, Perak and both states in East Malaysia. Nixon is actively involved in selling Malaysian residential and commercial properties since 30 years ago under its own company, Carey Real Estate which has four branches currently.
Property Quotient (PQ) interviewed him recently to gain insights on what MIEA can offer to promote Malaysian real estate and the Malaysian property outlook especially the residential market. PQ: Can you briefly tell us about your organization and what are your initiatives in creating competent and knowledgeable estate agents in Malaysia? Nixon Paul (NP):The Malaysian Institute of Estate Agents (MIEA) was established in 1970 and is a recognized body representing all registered agents in the country. Currently MIEA is in an aggressive expansion phase. It aims to bring together those engaged in the estate agencies in the other states within Malaysia and provides training as well as education to improve their technical and general knowledge. MIEA has formed a bilateral cooperation agreement with the National Association of Realtors (NAR) of the USA, Institute of Estate Agents (IEA) of Singapore, Real Estate Institute of Western Australia (REIWA) and Real Estate Institute of New
Zealand (REINZ) to further strengthen professionalism of country’s estate agents in order to meet the new challenges ahead. PQ: How do you see Malaysia in the next five to 10 years’ time compared with the rest of world? NP: According to Forbes, we are ranked third in the “Top 10 Best Countries to Retire to in 2013” after Ecuador and Panama where both of them are in North America. I would say that we are the best in Asia and in the next five to 10 years Malaysia will become the top of the heap because of the quality of life here is better than other countries coupled with great infrastructure and amenities. On the real estate investment front, Malaysia needs continuous promotional efforts and sometimes we should market it aggressively in order to create a buzz for the world. This initiative will be realized if there is cooperative task force between Ministry of Tourism and governmentrelated agencies such as Malaysia Property Incorporated, Malaysia My Second Home (MM2H) and property-related agencies such as MIEA.
Nixon Paul, President of Malaysian Institute of Estate Agents
dependent on the location especially residential areas with high connectivity, full of amenities as well as safety and security. In terms of residential type, a high-rise residential generally offers more return (7% per annum in average) than landed property which offers less than 5% per annum. The outlook for both segments remains stable due to strong PQ: In your opinion, what is the unique demand from local investors. And a highselling proposition of the Malaysian rise residential with lifestyle theme is in residential market that makes it more high demand nowadays as this trend is attractive for foreign investors? popular to young Malaysian generation. NP: Malaysia’s unique selling proposition on residential property is still the capital appreciation because historically, Malaysian residential sector appreciates between 6% and 8% annually. Because of its capital appreciation, Malaysia becomes the most competitive market in the region. But the most important criteria is every residential development must cater to all the different kinds of profiles. Developers should not abandon the middle class as they are the most dominant buyers in the market right now. They determine the products that they would like to purchase. Currently, the lifestyle concept is their first choice with some other aspects that are considered such as safe, clean and calm environment.
PQ: As a closing statement, what is your key advice to foreign investors who are looking to invest in Malaysian real estate?
NP: “Buy now!” Do not speculate the current property price and adopt a “wait and see” attitude. If you think the price will drop by 20% or 30% next year, it’s not going to happen. I foresee that the house price will rise gradually and from my point of view, it’s not too late for investors to invest in Malaysian residential market as we are still the cheapest in the region. Investors can choose a range of products from landed property and high-rise residential which they can buy from estate agents as well as developers. Malaysian foreign ownership rules are PQ: Out of all property segments, relatively liberal as compared to most of which segment will offer the best ASEAN countries which have restrictions returns in 2013? What is the outlook on foreign ownership of property. for the sector in 2013? NP: Obviously when we talk about the best returns, the residential sector will For more information about Malaysian give what we are looking for compared Institute of Estate Agents (MIEA), please with all segments. However, it’s very much visit http://www.miea.com.my
Scaling up Needless to say, costs of building hospitals and hospital equipment have gone up significantly. A plan to put a hospital into a REIT will provide better access to capital to purchase new medical equipment or to improve the hospital and its medical services.
REIT S IN MALAYSIA by Veena Loh
Currently, the size of healthcare market in Malaysia is around 4-5% of its GDP but the potential for growth can be significantly higher if compared to Organisation for Economic Co-operation and Development (OECD) countries like Australia (8.7%) and Japan (9.5%). Unlike Japan, private spending on health in Malaysia comprises a more than half of total health spending in the country. The size of the Malaysian private healthcare sector has been growing at double-digit levels of 25% pa to reach RM8 billion in 2011, according to Frost and Sullivan. Malaysia has 229 private hospitals and more than 6,000 medical clinics, with 90% of the private hospital market concentrated in West Malaysia. Cities with the higher spending power, Kuala Lumpur (50%) and Penang (25%) altogether command three-quarters of the total private hospital market. The outlook for healthcare in Malaysia is very good due to the rapidly aging population. The number of Malaysians aged 60 and above is projected to rise from 2.1 million (7.4% of population) in 2010 to 3.4 million (9.9%) in 2020. When countries age, their healthcare expenditure as a percentage of GDP will rise to levels experienced by “older” countries like Japan. Among the world’s economically advanced countries, including Japan, healthcare spending per capita is about four times higher for people age 65 and older than for the rest of the population. In addition, reported chronic and lifestyle diseases is also on the rise and adds to the need of healthcare. There is strong potential for regional expansion by local healthcare providers in Asia as the population aged 65 and above in Asia is rising dramatically. The changes that occurred over 50 years in the West are being compressed into 20 to 30 years in Asia, according to statistics by the United Nations.
Ampang Putri Specialist Hospital was injected to REIT by Al-Aqar KPJ REIT
In order for private hospitals to expand quickly, REITs offer a good alternative to raise the capital requirements for the expansion
Medical tourism is another important driver for healthcare outlook. Malaysia intends to increase the number of medical tourist arrivals from 400,000 health tourists in 2010 to around two million by 2020.
For any business that includes a hospital, the bigger, the better. At a greater size, you can absorb higher risk by diversifying through a greater variety of revenue streams via different types of medical services that target different populations, age or gender. Expand into new townships & go regional for growth Healthcare REIT allows private healthcare to expand faster to new townships and expand their regional footprint to tap new markets. In Singapore, healthcare REITs such as Parkway Life REIT (PLREIT) acquired three nursing homes in Japan (S$50m); and Gleneagles Medical Centre, Kuala Lumpur (S$6.45m) while Singapore First REIT (FREIT) acquired Sarang Hospital in South Korea, Aug 2012. Win-win for investors and hospital operators Investors are also looking for steady and safe investments during global economic uncertainties - healthcare REIT are GEMS as it offers good stable returns. Some good examples are the listed healthcare REITs which owns hospitals and offers safe returns as they have long term tenants with fixed income growth & low lease renewal risks. Hospital operators can concentrate on what they do best, that is, taking up more challenges where they can provide other or better forms of healthcare.
Currently, there are only two healthcare REITs in Malaysia but the potential growth Rising per capita income in Malaysia will for them is very good: (1) Al-Aqar’s first translate to rising demand for more and listed Islamic healthcare REIT (2) Sunway better quality healthcare, more private REIT, which offers commercial, retail healthcare services with shorter waiting properties and hospitality as well as a times. conventional healthcare REIT. Given the strong potential for healthcare in Malaysia and the region, the outlook for healthcare Real Estate Investment Trust (REITs) is expected to be equally good. In order for private hospitals to expand quickly, REITs offer a good alternative to raise the capital requirements for the expansion of private hospitals.
This is an abstract from MPI’s presentation at the 2 nd Annual Hospital Revenue Management in Anantara Bangkok Sathorn, Bangkok held on 6 to 7 March 2013
FOUR SEASONS PLACE TO OPEN IN 2015 by A.Lalitha
Courtesy of Pickard Chilton
Located beside the Petronas Twin Towers and fronting Jalan Ampang, the 65-storey integrated development project will be the first Four Seasons Place in South-East Asia, and the third in the world. Comprising 1.5 million sq ft of space, the iconic development will consist of over 300,000 sq ft of luxury retail space, with over 231 hotel rooms, as well as hotel service apartments and residence ranging from 1,300 to 12,000 sq.ft. in size per unit. It was reported that the gross development value of the project may exceed RM2.5 billion. It is rumoured that the serviced residences will have a price tag of about RM2,500 per sq ft, which will be a new benchmark for the Klang Valley. The project will be developed by Venus Assets Sdn Bhd, a company controlled by Ipoh-born tycoon Ong Beng Seng, Tan Sri Syed Yusof Tun Syed Nasir and Selangor’s Sultan Sharafuddin Idris Shah. Project Name & Location
Four Seasons Place
Venus Assets Sdn. Bhd.
RANKS WELL INTERNATIONALLY
Czech Republic 5
3 Thailand 6 Malaysia 10 Indonesia
Malaysia has ranked 6th in Bloomberg’s Top 20 Global Emerging Markets, ahead of Indonesia and Philippines but three spots below Thailand. The emerging markets were graded according to the ease of doing business, perceived level of corruption and economic freedom. The 2013 Asia Business Outlook Survey by the Economist Corporate Network ranked Malaysia fourth among 13 leading investment destinations in Asia with top three spots going to China, India and Indonesia. In the World Bank Report released in the 4th Quarter of 2012, Malaysia also was ranked the 12th most business friendly country globally and is first in terms of ease of getting credit. Malaysia is on track to being recognised as a preferred business destination internationally. However, more needs to be done to improve corruption, Malaysia was ranked 54 out of 176 in the Corruption Perception Index 2012 by Transparency International and to also improve the quality education to ensure a strong workforce is available in Malaysia.
OF NUMBER OF PROPERTIES Source: NAPIC & MPI Research
Note: p = preliminary data Legend: Existing supply: Total Space (LHS)
Incoming supply: Total space (LHS)
Existing supply: No. of properties
Incoming supply: No. of properties
KUALA LUMPUR Total Space (‘000 sq. m)
140 120 100 80 60 40 20 0
No. of Properties (Units)
No. of Properties (Units)
Total Space (‘000 sq. m)
JOHOR Total Space (‘000 sq. m)
90 80 70
No. of Properties (Units)
No. of Properties (Units)
Total Space (‘000 sq. m)
DESPITE A SLOWDOWN IN SUPPLY
REMAIN STABLE IN MAJOR STATES
THE INCOMING SUPPLY OF
Occupancy Rate of Shopping Complexes in Selected States, 3Q2008 to 3Q2012p
BETWEEN 3Q2008 AND 3Q2012,
Source: MPI Research
Malaysia Property Incorporated (MPI) receives foreign investor queries on an ongoing basis. For any parties interested to pursue these investment requirements, please contact the MPI team at email@example.com
Development land less than RM 15 million for high-end condominium project
10 - 20 acres of land for furniture mall
Landbank, Development rights
5 - 7 acres of land for development
Greater KL (Southern part)
10,000 square feet area
Landbank, Development rights
10 acres and above of freehold land to built a logistic park
Klang Valley (Shah Alam, Bukit Raja)
Landbank, Development JV
Mixed development with medical component, medical resort e.g medical themed service apartments, retirement village
Klang Valley, Johor, Penang
2Q 2012 Landbank
4Q 2011 Factory cum distributor office
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Disclamer: This report contains information that is publicly-available and has been relied on by Malaysia Property Incorporated on the basis that it is accurate and complete. MPI is not liable if the case proves to be otherwise. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and the same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed.