With the growth of e-commerce and logistics, the industrial sector continues to boom. People are changing their spending habits by buying things online, reducing any non-essential physical interaction. By ASEAN standards, Malaysia has the 2nd highest e-commerce penetration rate in the region. The e-commerce sector would expand over time with the increased adoption of IT knowledge among our fellow Malaysians. On the other hand, the country's main logistic drivers include manufacturing, food & beverage, pharmaceutical, and third-party logistics (3PLs) are promising too. Following that, the industrial property market has seen a rapid emergence of warehouses in recent years.
Recently, Hap Seng latest industrial project at Seksyen 23, Shah Alam completed by Q12021 an industrial development with a net lettable area of 1.38million sqft that consists of semi-detached units, flatted warehouses. Besides that, Australia's LOGOS SE Asia has entered into a joint venture with Global Vision Logistic (GVL) Sdn Bhd to develop a logistics, warehousing, and e-commerce hub 29-hectare site on Section 16, Shah Alam. The project will feature 5 warehouse blocks and an NLA of 5million sqft. In 2018, Daiwa House Malaysia Logistic Sdn Bhd proposed a new project in Shah Alam Seksyen 33, Selangor. It took part in the development, leasing, and operation of the rental warehouse (D-project Malaysia) to be completed by June 2023.
Sunway Construction completes a warehouse for Nippon Express (Malaysia) Sdn Bhd that consists of a gross floor area of 610,803sqft.There are piple line for LYL Group to build new warehouses with a total net lettable area of 1.5million sqft in 2023/2024,. Sime Darby developed industrial park includes Elmina Business Park, XME Business Park, and Bandar Bukit Raja, Industrial Park. Eco-Business Park V, a project by Ecoworld that offers 72 units of cluster factories with built-up sizes from 3795sqft and 28 units of Semi D factories with a built-up of 7870sqft. Alpha Galaxy Logistic Hub on the other hand has a built-up of 1.5million sqft that consists of 2 warehouse facility blocks.
Could we see an overbuilt and oversupply of warehouses in the future?. According to TheEdgeMarket, two mil sqft of new logistics and warehousing facilities will be built over the upcoming two years. But our estimated research could point to that amount doubling up. As vaccine rolling out, we would eventually welcome the post covid era accelerated growth of the business. In the post covid era. Do we need so much warehousing space? Too much storage of products will ultimately lead to cash flow problems for manufactures.
For the past two years, there is tremendous growth in warehousing needs. Developers carrying out feasibility studies cannot only rely on past data and demand in their local area. A feasibility study needs to encompass the future of a covid post era and a larger geographical location with integrated market knowledge of the total development. There must be a form of more integrated data with NAPIC or a primary form of data collection.
In preparation for future storage, industrial developers need to be differentiated. Areas of niche storage include cold storage warehousing, multi-purpose warehouses for assembly and showroom units, last-mile and e-commerce delivery centers, and central kitchens.
Another sector-specific focus is life science. A unique space for the future type of businesses, i.e., medicine, biotechnology, laboratory usage, and education, is the few businesses growing during this pandemic. We would no longer provide a basic space for these businesses.
The future is going to be hard to predict. with the expectation of growth, we are going to overbuilt just as it has beset in Malaysia's residential and commercial sector.
With our obsession of growth and economic recovery, We have the capability to overbuilt anything gave enough time no matter how strong the future demand.