FACTORIES, factories everywhere but not a buyer or tenant in sight. This expression may well sum up the dire state of the industrial property sector where sold and completed units remain empty for years and weak demand has discouraged developers from building any more factories.
There are not many industrial parks as successful as, say, Taman Perindustrian Sime UEP in Selangor that has attracted big names like Faber Castell, Proton, Daisho, and Behn Meyer.
More often than not, one continues to see rows and rows of empty terraced factories in places like Pulau Indah, Rawang in Selangor and Johor Baru. During a recent property auction fair, a 1 1/2-storey terraced factory with 2,000 sq ft area in Pulau Indah was offered at a reserved price of RM160,380 compared to the estimated appraisal value of RM220,000. A single-storey terrace low-cost light industrial factory with 1,600 sq ft area in Bukit Sentosa, Rawang, was offered at a reserved price of RM47,239 compared to the appraisal value of RM80,000.
The many vacant factories are a sore re- minder of the pre-1997 economic crisis when Malaysia was a favoured country for foreign direct investment (FDI) and the over-zealous mood to build more and more industrial units.
The Property Overhang Report for the 4th quarter of 2002 has called for more concerted efforts to overcome the 2,106 units (95.8%) of the hardcore overhang of industrial units that had been in the market for more than two years. Units priced less than RM250,000 made up 54% (1,137 units) of the hardcore overhang in the country.
It said all states recorded increases in unsold industrial units except for Negri Sembilan (-8.2%), Sarawak (-2.3%) and Malacca (-1.2%). Kedah saw the highest increase in industrial overhang, about 32.3% from 31 units in the 3rd quarter of 2002.
Flatted factory recorded the highest overhang rate of 64.2% though its contribution to the total industrial overhang was minimum. The overhang rate remained unchanged at 64.2% since the 1st quarter of 2002.
By type, terraced industrial units formed the bulk in terms of number with 1,052 units or 47.9% of the industrial overhang, followed by detached units 27.7% and semi-detached units of 19.7%. Detached units rose significantly by 8% over the preceding quarter. Unsold de- tached units increased from 563 units in the 3rd quarter of 2002 to 608 units in the 4th quarter.
Of the total unsold industrial units, 46.7% (1,026 units) were completed ones ready for occupation, 23.9% (526 units) under construction and the remaining were units from the planned supply.
However, there are also the success stories. For example, public-listed Crescendo Bhd's Taman Perindustrian Cemerlang in Johor Baru had done quite well.
Its managing director Gooi Seong Lim said sales of its semi-detached factories had been encouraging since their launch last August. The units are priced from RM680,000 and RM1.18mil. Of the 24 larger units there were only seven to eight units left while 15 of the 22 smaller units had been sold.
Despite the sluggish industrial market in Johor, Gooi said the group could still sell terrace factories with a 5,000-sq ft built-up area.
He said 60% to 70% of the buyers were companies from Singapore and other foreign countries relocating to Johor while the rest were local supporting companies.
Taman Perindustrian Cemerlang's traditional industries include plastic, food and medical manufacturing.
According to Gooi, the industrial park's attractions include its proximity to Singapore, availability of labour and lower costs such as lower utility and assessment charges.
“We also build very good quality factories. We don't compromise on quality,” he said, adding that the group had maintained prices of its launches.
Vigers Property Consultants (M) Sdn Bhd managing director James Wong Kwong Onn told the recent 14th National Real Estate Con- vention the industrial property market continued to be weak and lacklustre and had not recovered from the 1997 Asian economic crisis.
This is evidenced from the slowdown of the global economy and steep competition from China resulting in the drop of foreign direct investments into Malaysia in the last few years, the slowdown in the manufacturing sector, and decline in the volume and value of transactions of industrial properties since 1998.
He also noted the slow take-up rate despite the surplus of vacant industrial lands in existing industrial parks.
“The closure and downsizing of factories, particularly in the electronics, IT, furniture and textile sectors, had resulted in many factories either sold below valuation and market value or remained vacant and unsold,” he said.
Wong said the industrial property market in Johor was the most seriously affected, with weakening demand leading to further falls in volume and transactions.
“In 2001, the overhang of industrial properties in Johor was the highest, numbering 671 industrial units and accounting for 25% of national industrial overhang. There were no new launches of industrial properties in 2001, due to excess capacity and the weak performances of the manufacturing industry,” he said.
Wong said vacant pieces of leasehold industrial land in Johor Baru were selling at the peak at RM15 to RM18 per sq ft (psf) but were currently selling at between RM8 psf and RM10 psf.
“However, there is demand for factories of 20,000 sq ft in Johor Baru and these are gradually being taken up as no new building of this size was constructed in the last two years,” he said, adding that the bright spots were the success story of the Port of Tanjung Pelepas and the promotion of the Tanjung Pelepas industrial park into a petrochemical hub.