Kuala Lumpur industrial vacancy rate rises to 2.5% in Q2

Find out what drove vacancies to increase during the quarter. 

According to a JLL report, three warehouses were completed in Kuala Lumpur in 1H23. LYL U10 Phase 2 (Lot 5,2A & 6), YTL Shopee Express, and Mapletree Seksyen 22 contributed approximately 3.4 million sq ft of warehouse space to the market. 

Overall vacancy rate increased to 2.5% (4Q22: 1.6%), added JLL. This increase is attributed to Mapletree Seksyen 22 which has managed to secure an 80% occupancy rate thus far. “As it stands, new projects coming onto the market in the quarter have largely been fully occupied, with 3PL and e-commerce companies seen to be absorbing the majority of newly-completed warehouses,” the report said.

Here’s more from JLL:

Warehouse demand experienced ongoing growth for the first half of the year, with manufacturers continuing to expand storage space, as evidenced by increasing net absorption. That said, manufacturers remained cautious over forecasted production volumes as inflation and existing supply chain constraints could negatively impact production outlook.

In the quarter, warehouse demand stemmed from third-party logistics (3PLs), pharma/medical devices, oil & gas, and automotive subsectors. Additionally, demand for high-quality green warehouses has increased as ESG takes centre stage in corporate strategy.

Foreign interest remains strong with the China Plus One strategy

Foreign interest in the market remains strong as more companies look to diversify their supply chain risk and exposure to China via the China Plus One strategy.

Overall rents have increased further, led by newly-completed projects coming onto the market with more desirable specifications. On a biannual basis, rents grew by 5.1%. The rental market remains hot as rents were seen to be climbing continuously since 2019.

Outlook: Logistics market to remain resilient as stock quality improves

Rental growth is expected to continue as the market expects more high quality, sustainable warehouses to come online in the near term. These warehouses are expected to come online at higher-than-average market rents.

Trends of asset enhancement initiatives are also expected to continue as landlords of older warehouses look to attract strong tenant rosters which typically demand higher-quality warehouses.

Note: Kuala Lumpur Logistics & Industrial refers to the Greater Kuala Lumpur prime logistics market.