Searching for industrial properties can be a daunting experience. The state authorities divide a township into different zones, i.e., agriculture, residential and commercial zones. Out of all these zones, the industrial zone is the least available in the market. Industrial land is scarce because industrial properties are located very far from the cities and close to ports such as west port Klang, north port, and others. This is due to the regulation to restrict the amount of pollution arising from the factories and warehouses. Nevertheless, the State Authorities now allocate more land to industrial zones to attract national and international companies to invest in Malaysia. According to 2021 NAPIC studies, although industrial property only consists of 1.8% of 80,694 property transactions, it contributes to 10.8% of the value. Hence there is great demand for well thought and designed industrial premises.
Each type of industrial property serves a purpose. But generally, it falls under warehouse space, manufacturing space, or hybrid space (which can be a mix of warehouse, assembly, or manufacturing). Thus, do consider these factors when you start searching for an industrial property.
Each type of industrial property serves a purpose but generally falls under warehouse space, manufacturing space, or hybrid space (which can be a mix of warehouse, assembly, or manufacturing). You will quickly learn that the smaller details in each property's specifications can drastically change what type of business can effectively operate within a space.
When starting your search for industrial space, here are some of the factors that you need to consider:
Proprietor nature of business.
Suppose you do not foresee changes in factory space and your operations need substantial modification and renovation where the landlord may object to the modification. In that case, it will be more strategic to purchase from a long-term perspective. It is because you do not want the landlord to terminate the lease and sell the industrial property. However, if you are a new business owner, still growing and scaling your business, you may consider renting as the rental might be less expensive and more predictable. New business owners can also have more lists of warehouses and factories for rent. They can differ in locations, building sizes, and layouts, specifications.
Evaluate the cost to purchase or rent in a long run
The main advantage of renting an industrial property is that your initial capital is lesser for rent. However, the main advantage of buying industrial real estate is that you end up paying less in the long term. And by purchasing the industrial property, you enjoy the appreciation of the property value.
How do you evaluate these factors?
One way is to do a cash flow analysis to estimate how much cash you need to set aside to cover the property. This helps you weigh the pros and cons of renting and buying. Of course, if you purchase a property, you benefit from tax savings. Unlike rent, the money you pay is not deductible. Thus, purchasing the property looks favourable from a tax perspective as you are allowed to recover this outlay over time by yearly depreciation deductions.
Factory Operating Space & Warehouse Space
If you are already operating out of factory space, then you may know how much space and what type of floor plan your business would use. We advise prospective tenants and purchasers to work with the amount of land area needed instead of the factory or warehouse-built up from the many experiences and conversations. We realize many prospective purchasers are not aware that there is a different provision of space allocated for the offices and auxiliary spaces. Hence it is easier that the tenant specifies the land space, i.e., 1 acre, 2 acres, and 3 acres. Averagely the amount of built-up is at 50% of the land area. An acre will give a built-up of 43,560sqft, of which half of it will be built-up space. Out of half of the built-up, 30% of it will be used as office space.
Be clear on the location you intent to rent or purchase.
We often received calls from prospects keen to look at a large geographical span to operate their business. Without being specific on location, searching for an industrial property can be tiring and challenging. Thus, always narrow the area you want for your business. This will help your property search more efficiently. For example, some key industrial areas are Shah Alam, Bukit Jelutong, Klang, Subang Hi-Tech, HICOM Glenmarie Park, Kepong Industrial Park and Penang.
For some businesses, in retail and customer service businesses, location is all-important. If you have established a winning business location, you don't want to lose it because of a rent escalation or because the landlord wants the property for another use. If you own the facility, you won't have these worries.
If you are renting in an area where you think land values will continue to increase, it would be better to own the property (and thereby benefit from this appreciation if you ever sell) rather than to rent it.
Industrial property access and loading area
The setback for the warehouse and factories facing the main road is 40 feet. If there are adjoining factories that are side-by-side, setbacks will be at 25 feet from the gate. We have received multiple requests from tenants or buyers that wanted a large land or parking area for their vehicles and containers. Such factories are not many unless your purchase industrial land and built it to your needs as contractors maximize their factory build-up because industrial land is expensive.
It is in our opinion when looking for warehouses with loading bays. It should have a ratio, one loading bay to a space of 10,000 sqft. If you are looking at 70,000 sqft warehouse space, ideally, there should be a minimum of seven loading bays.
If you are a logistics, e-commerce companies are looking for warehouses or transit points. It is essential to inform us of the needed eave height. For example, instead of considering the number of square feet required, you may consider and advise us on the number of pallets you need to store on the premises. Warehouses with higher eave heights provide a better space efficiency, where the tenant does not require a more significant built-up area. We advise prospective tenants to share warehouse spaces with another tenant. Such advantages include having prime location spaces with a more affordable rent rate, or the prospective tenant can minimize office spaces or auxiliary spaces that are not needed.
There are e-commerce, courier companies, or manufacturers that do not need high ceilings; by having such flexibility, tenants can procure more affordable rental units. Hence it is essential to work with us to start mapping out your ideal layout, and they can give you some direction on where to start with a range of square footage.
There are several options to consider depending on your business. I would suggest starting to think about the number of staff you have, the size of equipment you have, or plan on purchasing, staging areas required for shipping and receiving and racking and storage options need.
Energy and gas supply and cost of installation.
Energy efficiency is a factor in industrial space because, with hefty equipment, inefficiencies of installing additional power lines or gas pipes can add cost. We advise prospective buyers to thoroughly check with their machinery manufacturer to determine the actual amount of electricity needed or the cost of connecting to the nearest gas line. Much time is allocated to search for a high electricity amount when the prospective purchaser may not need it. Separately, we would advise prospective purchasers to check out the cost of upgrading the electricity power, the cost of having a new distribution board, and the time frame for installation. By thoroughly checking thru, before a search starts, the prospective tenant and buyer eliminate many inefficiencies and increase the search's effectiveness.
Find the right size for business operations
Planning for future growth for the right fit of a business can be very difficult. The space that suits your business needs today may not meet your needs tomorrow. With the current uncertainty of business and the business environment's challenges, you would require a large amount of flexibility in thinking and improvising. Should you want to retain your mobility, it is better that you consider renting instead of purchasing industrial real estate.
However, prospective tenants may find the "right infrastructure" that fits their costing, location, and space and a good and flexible landlord should you decide to rent. For example, they do not want the excessive renovation of the rented unit or heavy manufacturing, which can depreciate the factory value quicker.
On the contrary, there may be facilities and industrial space that may not fit the future tenant requirements. Thus, landlords usually provide an attractive incentive to rent their premises.
Besides, renting saves start-up time as the construction of a factory or warehouse typically takes at least a year to complete. During this period, the business owner has to forgo the business opportunities.
Moreover, by purchasing an industrial warehouse or factory, the buyer must undergo lots of paperwork such as a construction permit, construction contract and others. These processes tend to be challenging and take a lot of time. On the other hand, renting can be a hassle-free process if the business owner engages an experienced property specialist like IndustrialMalaysia.
IndustrialMalaysia your trusted industrial property specialist
Our industrial real estate agents are always available to help acquire or rent industrial properties by assessing your needs and providing lists of personalized recommendations. We are constantly watching the real estate rental market, conditions, and trends. We help our business transform their industrial properties to better suit changing needs. We are one of the best industrial property website in Malaysia. Want to know more about the industrial property, don't hesitate to contact us at hello@industrialmalaysia.com.my