Why should you buy industrial land? | Industrial Malaysia
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Why should you buy industrial land?

Why should you buy industrial land?

When you need to find the best property to suit your business’ unique needs, it’s better to start by finding the right plot of industrial land and building on a strong foundation

Finding the right property for your business’ needs when looking through the classifieds is often a frustrating experience. It’s hard to find the right land size and building that is just right, and often the previous owner built something that doesn’t fit your needs.

These situations are often non-negotiable when you’re spending millions on an investment. You won’t want to put down all that money and then have to compromise with some aspect of the purchase that you don’t need — or worse, have to spend even more money to correct.

Moreover, there just aren’t that many factories on the market for you to choose from

However, there is a better option: Buying the right plot of industrial land for your business and then building on top of that land. That way, you have the ability to build according to your exact specifications.

Industrial land is scarcer than you think
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Based on the overall transactions in Malaysia, the volume of sales for factories is at 2.1% per quarter. Likewise, for industrial land, the percentage will also be small 5% (the quoted data mixes all the land types together).

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This chart shows the total land transaction in Shah Alam, Telok Gong, Pulau Indah and Kapar/Meru indicating an overall decline in the number of sales transactions over a 15-year period. Notice that in the past few years the number of transactions is about half that in the decade prior.

Based on the hard-to-get buyer data that we have, we notice that a significant portion of buyers are manufacturers. Their capital-intensive industry is linked with heavy investments, modifications and customisation of equipment and usage. Hence, with only 2.1% of transaction volume to play with per quarter, one imagines that there are not many options available.

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Buyer data from 2015-2020 show strong clustering of manufacturers in key Selangor industrial zones like Pulau Indah (left) and Kapar (right).

These results suggest that the frequency of transactions is low and that potential buyers really have fewer suitable options than they think — but buyers should not confuse this with the many terraced and semi-detached factories on sale today, which is currently experiencing an oversupply. You will find a similar problem in the housing industry, There is a shortage of supply of landed residential property in good locations. However, there is a huge oversupply of serviced apartments.

Worse, many of the ads you will find on the internet are likely faked to mislead buyers. This is a common industry issue when too many agents are competing in one single area, in contrast with Industrial Malaysia, which employs a one-agent-one-area model.

Why industrial land is a better starting point

Instead, when businesses partner with us to help them find the right plot of land to build on, they will get the right solution to accelerate business growth. This is particularly true in the 2- to 10-acre plot range, with buyers being able to enjoy cost savings and efficient land use because industrial land is guided by both plot ratios and set backs.

Assuming a buyer acquires just one acre, which is 43,560 sqft, he or she needs to provide a setback of 40 feet in the front and 25 feet by the sides, hence the maximum allowable build-up will likely be only half an acre. This is not sufficient for many businesses.

It is more cost-effective for you to build a factory or warehouse on a plot that is at least 2 acres in size because the same set back requirements apply, meaning you now have at least 1.5 acres of build-up.

When our client, a large pharmacy brand, was looking for industrial land last year, they told us that they had been scouting for a warehouse to store their pharmaceutical products. However, they could not the correct warehousing option in Shah Alam because the majority of the warehouses that were on market for sale were old, dilapidated and did not have the right fire fighting and safety systems.

They needed a warehouse that was over 40 feet in height with loading bays. This was hard to come by because, since the COVID pandemic, there has been a surge in demand for warehousing, servicing and storage. Owners preferred holding these valuable properties for their own use or to lease out, as the margins were good.

However, we managed to source a 4.7-acre plot of industrial land in Bukit Raja, Klang, which provided them with the freedom to build their own warehouse according to their specifications.

Industrial land also delivers more value over time

When you invest in a plot of industrial land, you can rest assured that you won’t lose money on your investment as there is always demand for land. The scarcity of industrial land is only worsening from year to year as there are certain zoning limitations for industrial activity. For example, you can’t just have an industrial area located too close to a residential zone.

In fact, a bare plot of industrial land has a higher appreciation potential when compared to a factory as it allows the new owner more flexibility of usage — especially since they don’t have to tear anything down before building.

Moreover, industrial land also has multiple economic utilisation purposes, including production and storage, and it doesn’t depreciate nor experience wear and tear as much as a factory.

Why partner with Industrial Malaysia to get industrial land?

In the current property transaction landscape, every property agency and agent is pushing a specific area or piece of land out to the market. In other words, they are selling a specific product to you whether or not it actually matches your business’ needs.

We believe the right approach is to provide prospective buyers like yourself with as much information as possible to make the most informed decision. We also take a larger view of the market, being able to leverage our one-agent-one-area model to deliver the most valuable insights in many key industrial zones.

When another one of our Singaporean clients in the supply chain management space indicated they were keen to purchase industrial land in Bukit Raja, we provided them with a more comprehensive view of the available options and they eventually purchased a plot in Pulau Indah which was better suited to their needs.

We attended to all their questions to give them the confidence to proceed. These questions included pinpointing the coordinates of the land parcel on Google Map and information on the site's plot ratio, construction restrictions, foreign ownership restrictions, leasehold expiration, encumbrances on the land, the profile of the seller, comparable land transactions around the vicinity of the site, the current rental rate for warehouses at Pulau Indah, vacancy rate and upcoming warehouse supply around the vicinity of the site, a list of key third-party logistics players in Pulau Indah, the main economic activities in Pulau Indah, the profile of manufacturing companies in the area, accessibility options, environmental and flooding considerations, and information on support and incentives from MIDA and the Selangor State Government.

We’re ready to assist companies to find the best industrial land option to accelerate their business growth. Are you ready to get the best land deals in the market? If you are, click on the button below to learn more.


 

 

 

 

 


 

 

 

 

 

Eric Mok
Eric Mok
Eric Mok
REA 2909
Industrial Real Estate Agent
Vinson Tan
Vinson Tan
Vinson Tan
REN 11385
Senior Real Estate Negotiator, Industrial Specialist
Rey Yap
Rey Yap
Rey Yap
REN 05623
Senior Real Estate Negotiator, Industrial Specialist
Yi Chen
Yi Chen
Yi Chen
PEA 2905
Probationary Estate Agent, Industrial Specialist
Cheah Chun Song
Cheah Chun Song
Cheah Chun Song
Senior Negotiator
Industrial Specialist
Celine Lim
Celine Lim
Celine Lim
Senior Negotiator
Industrial Specialist
Hugo Siow
Hugo Siow
Hugo Siow
Senior Negotiator
Industrial Specialist
Wayne Hor
Wayne Hor
Wayne Hor
REA1751
Industrial Real Estate Agent
Juliana Teh
Juliana Teh
Juliana Teh
REN 06375
Senior Negotiator
Chak Lee Huey
Chak Lee Huey
Chak Lee Huey
REN 02821
Senior Real Estate Negotiator, Industrial Specialist
Dion Diong
Dion Diong
Dion Diong
REN 01512
Senior Real Estate Negotiator, Industrial Specialist