Penang has overtaken Kuala Lumpur/Klang Valley as the most attractive region for commercial property investment. A survey on the country’s commercial real estate investment sentiment by Knight Frank Malaysia shows that the northern island has dislodged Kuala Lumpur’s Golden Triangle which was the top investment choice in 2015.
Knight Frank Malaysia, a global property consultancy, has released its Malaysia Commercial Real Estate Investment Sentiment Survey 2016. The survey takes a litmus test of insights and preferences of key players, namely fund managers, developers and lenders in the commercial sector for the year 2016.
It targeted some 700 respondents in the senior management levels across the property industry. About half of the respondents (55 per cent) were developers with the balance comprising a fair mix of commercial lenders (24 per cent) and fund/REIT managers (21 per cent), reflecting players in the commercial real estate market Penang garnered 67 per cent of the overall responses while KL’s Golden Triangle has retreated to fourth position with 49 per cent of responses after KL Fringe/Klang Valley (56 per cent) and Johor/Iskandar (55 per cent).
The healthcare/institutional segment is the most attractive sub-sector for investment, garnering 69 per cent of responses, followed by the hotel/ leisure segment (65 per cent), logistics/ industrial (52 per cent) and retail (50 per cent). The least attractive segment for investment is the office sub-sector with a poor 36 per cent response. Penang is currently the most attractive investment region for hotel/leisure (86 per cent) and healthcare/ institutional (79 per cent) developments possibly due to George Town being recognised as one of Unesco’s World Heritage Sites and the popularity of the state for medical tourism.
“The 2016 outlook for selected property sub-sectors, namely office and retail, is one of caution due to supply and demand mismatch,” says Knight Frank Malaysia Managing Director Sarkunan Subramaniam in an accompanying note. “Meanwhile, the healthcare/institutional, hotel/leisure and logistics/industrial sectors are expected to be more resilient due to sustained demand in the healthcare and education industries and tight supply in the logistics/industrial segment. The e-commerce business trend has led to demand for logistics warehouses.”
He adds that savvy investors such as developers, lenders and fund/REIT managers see opportunities in the property market despite the challenging environment. More than half of the respondents (63 per cent) are less optimistic on the overall economic scenario for 2016 compared with 2015 with only 19 per cent of them being more optimistic. In terms of investment outlook, 57 per cent of the respondents are less optimistic, followed by 30 per cent who remained neutral, while the remaining 13 per cent of the respondents are confident that the market will improve in 2016.
Fund/ REIT managers are expected to be actively investing in 2016; seeking opportunities in a slow property market. Fifty-three per cent indicated their intention to invest in the office segment and 47 per cent in the retail and healthcare/ institutional sub-sectors. This is provided yield expectations are met. Meanwhile, James Buckley, the executive director for capital markets at Knight Frank Malaysia writes in South China Morning Post that Malaysia remains an attractive proposition for real estate investors.
“We believe that over the next couple of years or so, the current macroeconomic environment offers real estate investors an attractive window of opportunity to increase exposure to Malaysian real estate,” he says. “It is now possible to buy world-class real estate in prime locations offering net yields of six per cent. For overseas investors, the ringgit has fallen 25 per cent against the US dollar compared with 12 months ago and is widely thought to be undervalued.
“We cannot say with certainty how 2016 will turn out, but for medium- to long-term investors, especially those from overseas who can benefit from the undervalued currency, we believe there is an attractive window of opportunity to enter the market.”
http://www.theheatmalaysia.com/Main/Penang-overtakes-KL-as-top-choice