JUST last month, MMC Corp Bhd announced the sale of three parcels of land measuring 188.74 acres in Senai, Johor to AME Group for RM370mil.
The deal came at a time when most developers shy away from new purchases in the Iskandar Malaysia region. But it seems like there is an exception in the industrial property space.
Players focusing on industrial development note that sales have moderated from a year ago but prices are still holding on well.
In the first quarter, the number of industrial transactions in Johor jumped 51.8% year-on-year while it added 16.1% quarter-on-quarter.
AME Group, which has been in the industry for some 20 years, is known for the construction and development of industrial and commercial premises.
Its flagship project is the industrial park project known as I-Park at Indahpura at Kulaijaya, which falls under Zone E of Iskandar Malaysia.
Notably, Johor remains the country’s top investment destination for the manufacturing sector, attracting RM27bil of investments for the first half of 2015 compared to RM21bil for the whole of last year.
In a recent interview with StarBizWeek, AME Group managing director Kelvin Lee Chai says: “Some investors have taken the opportunity to buy now because of the weaker ringgit. After all, it’s 20% to 30% cheaper now.”
He notes that some of the tenants have turned into buyers after renting factories from them for a while as it would be more cost effective.
About 30% of its properties are being leased out while the remaining had been sold. Out of which, 40% of the leased properties are anchored by multinational companies (MNC).
That said, he concedes that the pace of the overall market has moderated since the peak in 2012 and 2013.
Most of its MNC clients are from Singapore and Europe.
On the other hand, WB Land Sdn Bhd director Wong Yen Yap says he has seen a spike in inquiries for industrial property of late.
“But the investors from Singapore are taking a longer time for decision making even though the Singapore dollar has strengthened so much against ringgit. They’d probably want to wait for more certainties before they invest.”
But those who need space immediately are seizing the opportunity to buy at this time.
He says industrial land on built up basis has increased from RM200 per sq ft (psf) to RM230 psf in 2010 and 2011 to between RM300 psf and RM360 psf in since 2014.
WB Land has 136 acres at Desa Cemerlang at Ulu Tiram with a gross development value of RM600mil. It builds mainly semi-detached or customised detached factories.
Some of WB Land’s notable projects included Johor Port, Johor Premium Outlets, Aeon Bukit Indah and Senibong Cove.
Both companies offer integrated industrial projects to suit modern operators’ needs. Their projects come with security and smart features ready with fibre-optics. They also build workers’ dormitory within the industrial parks.
Other players in Johor like UEM Sunrise Bhd, the master developer of Nusajaya, Iskandar Malaysia, has also seen brisk sales for its industrial properties while sales for the residential units are slow.
Strategies for growth
AME Group director Simon Lee Sai Boon says speculative activities tend to slow down in this kind of markets but the target end users who are serious about their expansion plans will still invest in industrial properties.
On top of that, AME Group’s approach to improve from the feedback it gets from its customers as well as to maintain a long-term relationship with them had helped in their growth.
“We constantly maintain good relationships with the operators and understand their needs including their expansion plans,” says Simon, adding that the group acts as a one-stop centre for the clients so that they can move in and operate without hassle.
Of its 230 acres of I-Park at Indahpura, 190 acres has been developed and the total gross development value of the project is RM1.2bil.
“We’re running short of landbank, which is why we need to buy new land. For 40 acres, we can only accommodate another one to two operators,” Kelvin explains.
As for WB Land, Wong says it provides choices of ready-built and build-to-suit factories.
In addition, modern facilities are a essential to attract buyers.
“Interest from existing industries remains strong as many industrialists are facing a shortage of factory space.
“Many buyers of Frontier factories are from nearby factories. Many are upgraders from the traditional factory lots who are moving up to our gated and guarded industrial park,” says Wong.
He also says foreign interests are also promising, with most of them coming from Singapore.
He explains that business owners from the state city are already familiar with Johor Baru because of their partners and suppliers here.
“Because of that, they are attracted to Johor Baru’s one stop solution that offers low cost and low risk locations,” adds Wong.
The average selling price of Johor industrial properties is about RM300 psf now, which is equivalent to about SG$100 psf.
“At this kind of price, you can get a good freehold landed industrial property in Johor,” says Kelvin.
In comparison, a lower-end multi-storey 60-year leasehold factory in Singapore could cost about SG$400 psf.
“As the Port of Singapore Authority moves to Tuas, which is nearby Port of Tanjung Pelepas, we believe there will be more demand for logistic and warehousing properties,” says Kelvin.
Wee concurs as operators in Singapore have to consider to move across due to the Singapore’s rezoning and rising costs.
Among Thailand, Indonesia and Malaysia, investors choose Malaysia over the others because they are more familiar with the British law.
“In the mid to long-term, we are confident that Johor Bahru is still the natural choice for Singapore companies as there exists tremendous complementary opportunities as a low-cost alternative for their existing plants in Singapore,” says WB Land’s Wong. Landserve (Johor) Sdn Bhd executive director Wee Soon Chit says the reputation of the developer plays an important role in whether they can sell the properties because multi-national companies have high standards and requirements.
Another property consultant says Iskandar Malaysia will need industrial activities so that people will move there. Only then, Johor will be able to garner the kind of population that it targets.
The current population of Iskandar Malaysia is 1.8 million and the figure is projected to grow by 67% to 3 million in ten years.
Updating on the new land AME Group bought from MMC, Kelvin says the company has come out with a concept for the new project.
“We have talked to potential clients and there are plenty of opportunities due to the location.”
He notes that the site is next to America’s biggest chocolate maker Hershey’s confectionary plant.
Hershey’s confectionary plant, which spans across 50 acres, is the American brand’s biggest in Asia, costing RM816mil.
The potential clients can be players who are in the food and agro-processing segments due to the proximity to Hershey’s plant as that will create a good ecosystem. That will also provide an efficient supply chain in that vicinity.
“The Malaysian Investment Development Authority is also actively promoting this segment,” he says.
Kelvin says that AME Group will focus more on high value industrial property development going forward and it does not rule out venturing out of its hometurf Johor.
“We are looking to partner with land owners in the Klang Valley. We hope something substantial may come out next year,” he says.