HB Perspective 2022 by Henry Butcher Malaysia

MALAYSIA PROPERTY OUTLOOK 2022

by Henry Butcher Malaysia

FOREWORD

FOREWORD 2022, Towards A Sustainable Recovery?

2020 was a year which most of us, unless you are a producer of gloves, personal protective equipment or vaccines against the Covid-19 viruses, would describe it as “annus horribilis” a term used by Queen Elizabeth II to describe her year in 1992. Many lives were lost, businesses failed and people became jobless whilst all over the world children’s education was disrupted and people were confined to their own homes for long periods of time as part of governments’ efforts to curb and prevent the spread of the Covid-19 pandemic. Everyone had hoped that the pandemic would run its course and peter out by year end but alas, it was not to be. 2021 began with new hope and optimism and although most countries finally got their act together to get a handle on the situation, the emergence of new variants which were more infectious and some like the Delta variant, more deadly, put governments on full alert and frontline workers were not able take a step back and lower their guard. The discovery of the Omicron variant in

many countries including Malaysia, have forced governments to hold back on the full reopening of their international borders and start providing booster shots to improve the immunity levels of their citizens. For Malaysia, we faced the additional challenge of a political drama happening in the midst of an energy sapping pandemic and saw a change of government before its full term was up. The political instability has continued till this day although of late, the situation appears to have become more stable. Nevertheless, real stability will probably only come about after the dust has settled after GE 15 (15th General Elections) which must be held on or before July 2023 and that also on the proviso that there is a clear and convincing winner in the elections. As if the twin problems of a pandemic and political instability are not enough, we had to suffer the agony of massive floods which hit many parts of the country in December. Some lives were lost, many lost their homes and

possessions, businesses lost their stocks and properties were damaged. The severity of the floods and the lack of preparedness of the relevant agencies to tackle the situation has added to the financial burden on the country’s administration. Given that the country’s vaccination programme has progressed very well and to date, more than 79% of the population has been given double doses, life has been returning to near normal in the last one to two months. Malaysians have gone on holidays in popular domestic tourist destinations like Langkawi, Melaka and Penang and shopping malls, restaurants and attractions like Zoo Negara have seen crowds returning, especially on weekends and public holidays. People appeared to have gotten used to the new normal and have no fear in venturing out to shop and dine, albeit with the additional inconvenience of wearing masks, scanning their MySejahtera apps, queuing up within social distancing guidelines and regularly washing/ sanitising their hands.

HB Perspective 2022

FOREWORD

2020’s negative GDP growth of 5.6% was the second worst economic performance for Malaysia after the 7.3% decline recorded during the Asian Financial Crisis in 1998. The economy showed signs of recovery in 2021 and overall growth for the year is projected by the Ministry of Finance to clock in at around 3% to 4% before improving to between 5.5% to 6.5% in 2022. The World Bank has projected Malaysia’s GDP growth for 2021 to be 3.3% and improve to 5.8% in 2022.

continue to do so in 2022. The recovery will be gradual in the first half of the year but should build up momentum in the second half, barring any major catastrophes.

For the local property market, new launches by property developers, with the help of the Home Ownership Campaign (HOC) 2020-2021, appeared to be garnering encouraging response and some public-listed company developers have announced that they will be raising their sales targets for the coming year. The secondary market may see a pick up in demand as some banks have placed more attention to this market segment. It is also observed that as new launches were focussed on more affordably priced properties, those who were interested to buy high-end residences in choice locations have to look for such properties in the secondary market.

This issue of our annual property market report is the second produced under our refreshed HB Perspective series and we hope we have been able to provide some useful insights into how we see the property market in 2022 besides providing a round up on how the various segments of the market in all the states have performed in 2021.

On the whole, the residential and industrial markets appear to be on the mend after a disastrous 2020 and should

HB Perspective 2022

For the retail, office and hospitality sectors, the recovery will however take a little longer as the tourism industry will need some time to reach prepandemic levels whilst the retail and office segments are lumbered with an oversupply situation.

In parting, we would like to wish all our clients and associates a fruitful and rewarding year ahead and may 2022 be the start of better things to come.

Tang Chee Meng Chief Operating Officer

TABLE OF CONTENTS Transitioning But Not Without Transmission Issues in 2022

Kedah – Clamouring For A Better 2022

Penang – Looking Positive in 2022

Perak – Gradual Recovery in 2022

Klang Valley – Endurance Race in 2022

Negeri Sembilan – Making A Comeback in 2022

Melaka - Riding On Tourism in 2022

Johor – Steady Recovery in 2022

Pahang – Soft But Stable in 2022

Terengganu - Shaping Up in 2022

Kelantan – Anticipating A Steady 2022

Sabah - Recovering in 2022

Sarawak – Stable & Growing in 2022

Retail – Counting On Malaysian Shoppers In 2022

2021’s Finale Wraps Up A Remarkable Year

HB Perspective 2022

HB Perspective 2022 is a Malaysian property market report published by Henry Butcher Malaysia Group of Companies.

“Our strength begins in your market and takes you anywhere in the world.”

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HB Perspective 2022

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MALAYSIA OUTLOOK 2022

TRANSITIONING BUT NOT WITHOUT TRANSMISSION ISSUES IN 2022 A look back at Malaysia’s property market in 2021 and what’s potentially to come in 2022. If the transition from 2020 to 2021 was about hope and sanity after the lengthy lockdowns, business closures, job losses and political instability, the path to 2022 is fraught with rising prices, rainwater levels and the continuous permutations of the Coronavirus variant. The preceding 365 days in 2021 has certainly been eventful, beginning with the Emergency Order declared in January, the National Covid-19 Immunisation Programme starting in February, the bitter pill of the Movement Control Order (MCO) replaced by the 4-phase National Recovery Plan (NRP) in June, the appointment of the 9th Prime Minister Datuk Seri Ismail Sabri Yaakob on 21 August, dissolution of the Melaka and Sarawak state assemblies in October and November respectively before concluding the year with the “once in 100 years flood” in December which saw homes, cars and public properties submerged in parts of Selangor, Negeri Sembilan, Kelantan, Pahang, Melaka and Terengganu, displacing more than 50,000 people with 48 fatalities and 5 missing as of 27 December 2021. The detection of the index case of Omicron in the country on 19 November and only officially announced to the public on 3 December did not help either as it quickly ballooned to 62 by Christmas with the bulk of them imported cases. The new variant was also the reason for the government to freeze the Vaccinated Travel Lane (VTL) which had only begun on 29 November between Singapore and Malaysia. And although Health Minister Khairy Jamaluddin has affirmed in the same month that the endemic phase could be a long time away for Malaysia, any hopes for it to occur sooner has been shelved.

Volume of Property Transactions (Jan-Sep of 2019, 2020 & 2021) 243,250

Malaysia

204,708 201,068 11,490

K.L.

9,416

2019

10,407

2020

2021

47,800 37,729

Selangor

41,389

50k

100k 150k Overall Volume of Transactions

200k

250k Source: NAPIC

Value of Property Transactions (Jan-Sep of 2019, 2020 & 2021) 103,147.46

Malaysia

80,713.24 91,992.58 12,709.25

K.L.

9,470.80

2019

14,510.43

2020

2021

32,775.77

Selangor

25,533.50 30,950.96

20k

40k 60k 80k 100k Overall Value of Transactions (RM million)

120k Source: NAPIC

HB Perspective 2022

MALAYSIA OUTLOOK 2022

Overview of the Malaysian Property Market in 2021 Despite the lacklustre news, there were silver linings in the Malaysian property market in 2021. Market data presented by the Valuation & Property Services Department of the Ministry of Finance (JPPH) and Bank Negara Malaysia (BNM) in its quarterly and periodical updates demonstrated this against the battered backdrop the year before. In 2020, the Malaysian property market was badly affected by the Covid-19 pandemic and this was clearly reflected by the substantial drop in both the volume and value of property transactions for the year. The volume of transactions declined by nearly 10% from 329,647 transactions in 2019 to 295,968 transactions in 2020 whilst the value of the transactions came down by 15.8% from RM141.40 billion to RM119.08 billion during the same period. Then in the first nine months of 2021, data released by JPPH indicated that the property market appeared to have shown signs of a slight recovery although its sustainability still hinges on many factors such as the government’s ability to bring down Covid-19’s infection rates, preventing the spread of any new variant of the virus, the country’s political stability and the effectiveness of the measures implemented by the government to manage the pandemic with an eye to boost the economy, among others. Year-on-year (y-o-y), Malaysia’s volume of property transactions registered a 1.78% marginal drop in the first nine months of 2021 to clock in at 201,068 transactions but the value of the transactions rebounded by nearly 14% to almost RM98 billion or up about RM11.2 billion from 2020 but down RM11.2 billion from prepandemic levels in 2019. As in the past, the residential sub-sector was again the major contributor to both the volume and value of the transactions.

HB Perspective 2022

Residential – Getting Back on Track Residential - Factors to Watch in 2022 • The current low interest rates which have brought down the cost of home financing will motivate house buying interest. However, economists are predicting that Bank Negara Malaysia may raise interest rates in 2022 to rein in inflation and if this happens, it may impact demand for properties. • The Home Ownership Campaign (HOC) 2020/21 with its incentives and attractive offers has concluded its run at the end of 2021 and there has been no indication to date of an extension by the government. • The achievement of a vaccination rate of above 79% of the population and the progression to the provision of booster jabs will improve overall confidence and boost economic activities and thus ultimately benefit the property market. However, the emergence of Omicron has caused governments throughout the world including Malaysia to withhold the full reopening of international borders to control the spread of this new variant. • The adoption of proptech apps and digital marketing programmes will help developers gain a better understanding of their purchasers’ needs, develop a closer rapport with them and reach out to overseas buyers. • The new MM2H rules which have raised qualifying income thresholds and fixed deposit placement amounts may deter new applicants and reduce foreign interest in Malaysian properties. • The political situation in the country will continue to go through periods of uncertainty until the 15th General Election (GE15), which will likely be held in 2022, has been concluded and this will cause investors to be more cautious in the meantime. • The primary market is faring better than the secondary market because of the incentives given by developers and the government under the HOC but this may change once the campaign ends. • Some banks are refocusing on the secondary market because house buyers of such homes are perceived to be financially stronger and less likely to default. • Developers have to accept lower profit margins as building material

costs have risen and market conditions are not conducive to selling prices being increased to offset the higher costs. Residential - Bright Spots for 2022 • The focus of the residential market in 2022 will be on: - landed residential properties; - affordable high-rise apartments under RM500,000; - smaller units; and - niche high-end projects in good locations. • The secondary market may see an increase in interest because some banks are refocusing on this segment and at the same time, there is a vacuum in new supply of higher priced homes in good locations. • The removal of RPGT for property disposals after the fifth year of ownership is expected to provide a boost to the residential property market as the investors may reinvest their sales proceeds in other properties. • The continued recovery of the economy and reduction of the unemployment rate will raise confidence and provide a boost to the residential market in 2022. • The establishment of Vaccinated Travel Lane (VTL) and the reopening of international borders may bring back foreign property investors. • House designs will evolve to address issues arising from the pandemic such as a better planned study area to make Work From Home (WFH) more comfortable, providing more electrical points, improved internet connectivity including for common areas, adoption of touch-less technology eg. automatic doors, voice-activated elevators, cellphonecontrolled entry, hands-free light switches, curtains & temperature controls, implementation of controlled entry/exit points which can be manned with temperature screening or even some form of UV disinfecting device, dedicated lockers/room for temporary storage of parcels for later pick-up by residents and charging stations/ points for electric vehicles which are expected to grow in popularity in the coming years.

MALAYSIA OUTLOOK 2022

The performance of the residential subsector showed an improvement in the first nine months of 2021 as the volume of national residential transactions inched up marginally by close to 3% compared to the corresponding period in 2020. Value of the transactions on the other hand went up by a larger margin at 16%. In line with the recovery, Bank Negara’s data also showed that the first 10 months of 2021 witnessed a 32% increase in the value of residential loans approved compared to the same period in 2020. Incidentally, this is the highest loan value approved over the last 10 years with the months of March to June and October breaching RM10 billion per month. Although approval for residential loans has been promising, NAPIC’s latest available statistics nevertheless showed that the number of new residential units launched nationwide continued to decline in the first nine months of 2021, sliding down by 36.7% y-o-y from 29,556 units to 21,616 units. High-rise residences which made up 42% of the new launches in 2020 also declined to 35%. Sales performance over this period however recorded an improvement to 34% compared to the 22.7% achieved in 2020. Terraced houses dominated the new launches with 15,893 units (54%) followed by condominium/apartment with a 35% share (10,371 units). Meanwhile, the Property Industry Survey 1H2021 carried out by REHDA (Real Estate and Housing Developers’ Association Malaysia) revealed that the local property market saw declines of 8% and 6% in new launches and sales performance respectively in the first half of 2021. Only 39% or 4,524 units were sold from the 11,601 units launched during the period compared to the 45% sold from the 12,640 units launched in 2H 2020. REHDA’s survey also revealed that most developers held back on new launches in 2H 2021 but were planning instead to launch more projects in 2022 in anticipation of an improved market. These are tell-tale signs of the fading appeal of the Home Ownership Campaign (HOC) which may have completely run its course when it was needed most after being revived under the Short-Term Economic Recovery Plan (PENJANA) an d extended to the end of 2021 from its original expiry of 31 May 2021.

Volume of Residential Property Transactions (Jan-Sep of 2019, 2020 & 2021) 153,078

Malaysia

131,154 134,637 8,204

K.L.

7,252

2020

2019

7,981

2021

36,966

Selangor

29,939 33,392

50k 100k 150k Volume of Residential Transactions

200k Source: NAPIC

Value of Residential Property Transactions (Jan-Sep of 2019, 2020 & 2021) 52,777.72

Malaysia

44,986.27 52,333.06 6,292.75

K.L.

5,652.26

2020

2019

6,862.77

2021

17,814.86

Selangor

14,699.08 18,022.35

10k 20k 30k 40k 50k Value of Residential Transactions (RM million)

60k Source: NAPIC

Value of Residential Loans Approved (2017 to Jan-Oct 2021 (RM, mil)) Year/Month

2017

2018

2019

2020

2021

Jan

6.589

7,916

8,222

7,055

8,885

Feb

6.515

6,588

6,104

7,209

8,356

Mar

9.230

8,479

8,830

6,416

10,872

Apr

8.342

9,002

10,262

2,495

12,573

May

9.337

8,225

10,881

3,412

12,019

Jun

8.498

8,475

9,637

6,253

10,545

Jul

8.925

9,174

11,118

9,117

7,940

Aug

9.810

8,954

10,474

9,855

7,261

Sep

8.343

8,608

8,935

10,797

8,500

Oct

9.202

10,607

10,336

10,936

10,273

Nov

9.401

9,042

9,386

10,308

n/a

Dec

7.327

7,724

8,381

9,270

n/a

Total

101,519

102,794

112,566

93,123

n/a Source: BNM

HB Perspective 2022

MALAYSIA OUTLOOK 2022

Towards the end of 2021 and although December is traditionally a slower month for property sales in the past due to Malaysians going away for their annual

60k

-7

40k

75,320

-0.8

-5 -10 -15

99,931

H1 2017

H1 2018

H1 2019

-24.6

H1 2020

-25

H1 2021

% Change

Volume (Units)

-20

92,017

94,200

94,992

20k

Source: NAPIC

Residential Transactions Value Trend (H1 2017 to H1 2021) 34.7

35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30

30 25

9.5

25.61

0.4 -3.6

31.66

34.66

32.85

H1 2017

H1 2018

H1 2019

34.51

10 -26.1

H1 2020

H1 2021

% Change

RM (Millions)

Source: NAPIC

Index Point

Y-o-Y

Index Q3 2010 Index Point Average Price

198.6

199.5

195.0

195.3

190.1

178.5

167.1

0.7 1.9

1.0

0.2 0.2

2.2

6 2.7

6.5 2.0

2.6

2.8

6.9

8.8

143.6

126.8

112.0

1.1

4.0

2.3

100

156.3

150

2.4

13.2

200

13.2

Malaysian House Price Index Q3 2010 to Q3 2021

9.8

• Removal of RPGT (Real Property Gains Tax) from the 6th year onwards. • Allocation of RM1.5 billion for the building of low-cost housing. • RM2 billion allocation for the Housing Credit Guarantee Scheme to help those in the informal sector to own houses. The informal sector includes the small traders, micro-entrepreneurs and participants in the gig economy with irregular income streams. • Allocation to expand 5G services and RM3.5 billion for infrastructural projects. • Allocation of RM1.6 billion to help the tourism industry.

6.1

2.6

In anticipation of a market friendly budget to boost the property economy, Budget 2022 tabled on 29 October 2021 fell below expectations with only a handful of goodies announced and even fewer for the residential sub-sector. The key measures relating to the property market from Budget 2022 are as follows:

20 15

80k

6.7

Dissecting the MHPI by property types, terrace houses stood out as the sole positive frontrunner, recording a 0.9% y-o-y growth in Q2 2021 whereas all other residential types registered -2.7% for highrise, -3.1% for semi-detached and -6.1% detached houses. Despite terrace houses’ positive trajectory, it is still lower when compared to the previous quarters. The MHPI continued to spot negative growths in Q3 2021 with terrace homes at -1.0%, high-rise -2.9%, semi-detached -3.6% and detached homes -2.5%.

22.2

100k

102.0

In terms of price movements, the Malaysian House Price Index (MHPI) has always registered positive growth throughout the years although the rate of growth began to slow down in 2017. The deceleration was more pronounced in Q2 2021 as the MHPI registered an unprecedented negative growth and stood at 197.9 points, down 1.2% y-o-y. Despite its subsequent recovery to 198.6 points in Q3 2021, the MHPI remains a 0.7% drop from Q3 2020.

Residential Transactions Volume Trend (H1 2017 to H1 2021)

1.6

The pace of increase in the residential overhang moderated to settle at 30,290 units worth RM19.75 billion as at Q3 2021. At the same time, there were another 23,346 units of overhang service apartments worth RM20.6 billion in the market.

Q-o-Q Index Q3 2021P

102.0 RM220,154

Index Point Average Price

198.6 RM428,458 Source: NAPIC

HB Perspective 2022

MALAYSIA OUTLOOK 2022

year-end holidays, it was a bit different this time as many developers saw a surge in sales due to buyers rushing to take advantage of the incentives under the HOC 2020/21 before they ended on 31 December since there having been no announcement by the government that it will be extended into 2022. Further, with international travel restrictions in place and Covid-19 infections on the rise in many countries, most Malaysians preferred to skip their overseas holidays and opt for domestic travel and shorter breaks instead, thus allowing them more time to complete their sales documentation. The residential market in Q1 2022 will be sluggish due to the lull during the Chinese New Year period as well as the lack of any fresh impetus after the end of HOC 2020/21. Sales activities will only pick up in March and improve gradually into the second half of the year.

Retail – Rebuilding Over in the retail sub-sector, the supply of retail space in the country increased marginally in Q3 2021 to 16.875 million sqm from 16.840 million sqm in 2020 and 16.425 million sqm in 2019. Occupancy rate of the malls on the other hand declined to 76% in Q3 2021 from 77% in 2020 and 79.5% in 2019. Two rounds of lockdowns under MCO disrupted the business of shopping centres in the country for the most part of 2021 with the first starting from 13 January to 4 March. Dubbed MCO 2.0, a big majority of the retail trade were ordered to close during this time and footfall at popular shopping malls in Klang Valley plunged by as much as 90% compared to December 2020. Klang Valley malls however ushered in large crowds on the weekend after the lockdown was lifted on 5 March with touristy spots also filled with sizable crowds. This gave the impression of a recovery but the short respite in March was met with an abrupt end given the high daily caseloads exceeding 2,000 for two weeks in April. This led to another round of decline in malls’ footfall in Klang Valley and even the Hari Raya Aidilfitri festive season was not enough to draw as many shoppers back to the malls compared to the preceding month.

Retail - Factors to Watch in 2022 • The high daily positive cases remain worrisome with the new Omicron variant spreading rapidly across the world and Malaysia’s first case officially announced in December 2021. In line with that, the Malaysian government has decided to delay the country’s transition into the endemic phase due to the uncertainty that hovers over the virus’ transmission. A potential fourth-wave pandemic looms for Malaysian retailers and the dire consequences from forced closure of physical stores is not something non-essential retailers can afford to face anymore. • Border closures and the cumbersome entry requirements will continue to impact foreign tourists’ arrival and deter overseas leisure travellers from visiting. Klang Valley retailers who have been conventionally reliant on tourists spending will also be affected. • Prices of basic necessities and many consumer goods have risen since November 2021 and is expected to continue into the first half of 2022. This has led many F&B outlets to increase prices, at the same time, the higher cost of living will also affect the purchasing power of Malaysian households. • Malaysians’ take-home pay have been reduced by the Covid-19 pandemic and the well-being of this income stream is highly dependent

The interstate travel bans which continued to be enforced since January 2021 and throughout the Hari Raya period also took a toll on malls located in popular shopping districts as shoppers from outside of the capital city who tend to make their visits to experience the higher quality malls have been restricted from travelling out of their hometowns. The deprivation caused a larger dent to the already impaled retail bottom line because many shopping malls in the Kuala Lumpur city centre relied on such tourists for about 15% to 20% of their retail sales. The inevitable MCO 3.0 then followed from 3 to 31 May after the continuous surge of daily Covid-19 caseloads. During

on the country’s pace of economic recovery in 2022. As such, it is important for the country’s economy to remain vibrant as it will encourage higher employment and provide a security net in their finances. This in turn shall motivate better spending on consumer goods and services and this will be good news for the retail market. • Sales tax levy will be imposed on low-value goods from abroad which are sold by online merchants and sent to consumers in Malaysia via air courier services. • Service tax will be levied on e-commerce platforms except for food and beverages delivery and logistics. Retail – Bright Spots for 2022 A direct cash aid programme rebranded as Bantuan Keluarga Malaysia (BKM) will continue in 2022. Families with household income of less than RM2,500 a month and with 3 or more children will receive RM2,000 whilst single parents with income of less than RM5,000 will receive an additional RM500 and a further RM300 will be distributed to households with senior citizens. The adjusted minimum contribution from 11% to 9% to KWSP (Kumpulan Wang Simpanan Pekerja; EPF) will be extended for another 6 months until June 2022 and will result in higher monthly take-home pay for the KWSPcontributing Malaysians.

this period, retailers in the shopping centres suffered from poor sales when Malaysian shoppers consciously avoided enclosed places although “Low Risk” individuals identified by MySejahtera were allowed entry into the malls from 7 May 2021. After almost a year of struggle from the pandemic in 2020 and subsequently lumbered with two more lockdowns, any hopes for a recovery in 2021 was completely dashed when daily confirmed Covid-19 cases also jumped to historical highs just in the first half of 2021.

HB Perspective 2022

MALAYSIA OUTLOOK 2022

Quarterly Retail Sales Performances In Q1 2021, the Malaysian retail industry recorded a negative growth rate of 9.9% in retail sales compared to the corresponding quarter in 2020. MCO 2.0 was imposed at this time from 13 January 2021 to 4 March 2021 and during the initial period of this lockdown, the majority of the retail trades were ordered to close. Some non-essential retail shops were however allowed to open subsequently although business was no longer as brisk with few customers visiting the shops during peak hours.

Supply of Retail Space in Shopping Malls (2019 to Q3 2021)

Shopping traffic recovered momentarily when MCO 2.0 ended in March 2021 but was soon met by MCO 3.0 after a continuous surge of daily Covid-19 cases. Majority of the retailers were faced with very poor sales during this period as shoppers also deliberately avoided enclosed places. Phase 1 of the FMCO (Full MCO) then ran for a period of two weeks starting from 1 June 2021 and all non-essential retailers were ordered to shut their stores while Malaysian folks nationwide were also asked to stay home. A revised “exit plan” from Covid-19 known as the 4-phase National Recovery Plan (NRP) was subsequently introduced on 15 June 2021 which compelled nonessential retailers to remain closed and Malaysian consumers to stay at home, not unlike the conditions set by FMCO. In Q3 2021, the industry almost went on a free fall to record a disappointing growth rate of -27.8% in retail sales. Most retailers were forced to shut down in the first half of the quarter itself. All factors considered, Retail Group Malaysia (RGM) expects the retail industry to regain some momentum on its recovery by the end of the year and so for Q4 2021, the estimated growth rate has been 10

HB Perspective 2022

3,084,730 3,131,430 3,132,670

K.L.

3,717,400 3,730,670 3,564,910

Selangor

Q3 2021

2,442,260 2,469,650 2,343,120

Johor

The situation on the ground was in fact worse than MCO 1.0 which began on 18 March 2020. From 5 February 2021, more retail businesses were allowed to open in stages before shopping traffic finally recovered when MCO 2.0 ended on 5 March 2021. In Q2 2021, the industry recorded a positive growth rate of 3.4% in retail sales compared to the same period in 2020. The positive growth is attributed solely to the low base effect experienced a year ago when the Malaysian retail industry suffered a year-onyear decline of 30.9% in the quarter because of business closures.

16,875,250 16,840,380 16,425,180

Malaysia

Q3 2020

10M Nett Floor Area (sqm)

Q3 2019

15M

20M Source: NAPIC

Supply & Occupancy Rate of Retail Malls in Malaysia (Q3 2019 to Q3 2021) 16,875,250

Q3 2021

12,919,370

16,840,380

Q3 2020 13,048,640

16,425,180

Q3 2019

13,059,410

10M Space (sqm)

5M Existing Space (sqm)

15M

Space Occupied (sqm)

20M

Source: NAPIC

Malaysia Retail Sale & Other Economic Performances 2021 Economic Indicator (%)

Retail Sales GDP

Whole Year

-9.9

3.4

-27.8

(e) 18.3

(e) 0.5

-0.5

16.1

-4.5

(e) 3.0-4.0

Private Consumption

-1.5

11.7

-4.2

Inflation Rate

0.5

4.1

2.2

NA - not available; (e) - estimate Source: Retail Group Malaysia/Bank Negara Malaysia

revised upwards from 12.7% (forecasted in September 2021) to 18.3%. Retailers were hopeful that sales will climb higher in December 2021 as it coincides with two upcoming major celebrations - Christmas on 25 December and Chinese New Year on 1 February 2022.

As the National Covid-19 Immunisation Programme has been rather successful by reaching 90% vaccination rates among adults towards 4Q 2021, things began looking up when spas, wellness and massage centres were allowed to open to fully vaccinated individuals from 1 October 2021 followed by the lifting of interstate travel ban on 11

MALAYSIA OUTLOOK 2022

October 2021. With domestic tourism also beginning to ply the routes for Cuti-Cuti Malaysia, it brought more sales to retailers in the Klang Valley especially those dependent on tourism spending.

Office - Factors to Watch in 2022 • Recovery in the office sub-sector requires sustainable recovery in the economy which will then be able to generate an increase in demand for office space or at least enable companies to maintain their present offices. • The new hybrid style of working from home and on-site in the office adopted by many major companies will reduce requirements for office space by these companies. • Concerns of an oversupply of office space in the Klang Valley will continue to weigh down on the office market in 2022 and exert downward pressure on occupancy and rental rates. • The expected completion of a number of large scale office projects over the next one to two years such as Merdeka 118 and Tun Razak Exchange will worsen the oversupply situation. • With lessons learnt during the

For the full year of 2021, RGM estimates the Malaysian retail industry’s growth rate to conclude on a positive 0.5% and for the record, this is the fifth revision of the growth rate since the end of 2020, signalling the dynamic changes that has taken place in the Malaysian retail industry in the period under observation. Moving forward, RGM predicts a 6.0% growth rate in retail sales in 2022.

Office – Under Pressure The aftermath of the pandemic on Malaysia’s office sub-sector has left it faced with dwindling demand for space and a colossal amount of new office space coming on stream when several large-scale office projects come to completion from 2022 onwards. Despite the positive signs of economic movements like the workforce returning to business premises more frequently, this has not translated into significant uptake of office space across the country. This is largely attributed to the scattered recovery pace of business enterprises including some having fallen off from the competitive landscape altogether.

Covid-19 pandemic, new office buildings will adopt layouts, designs and technologies designed to cope with any new pandemics which may break out in the future. Office – Bright Spots for 2022 • The implementation of various economic stimulus programmes by the government to boost the recovery of the economy will help increase demand for office space and stabilise occupancy and rental rates. • The decline in demand for office space which was aggravated during the pandemic may lead to some developers shelving or deferring their new office projects. This will help alleviate the oversupply of office space especially in Kuala Lumpur. • The first nine months of 2021 saw an increase in FDIs. This will spur economic growth and benefit the office market.

Purpose-Built Office Rental Trend in Klang Valley, Johor Bahru & George Town (Q1 2015 to Q2 2021) 6 5 4

In addition to the flight from office to home as part of the measures to curb the spread of Covid-19 in 2020, a new norm has settled in 2021 as the office market adapts to smaller dimensions or if not, left entirely vacant. It is amidst such a backdrop that the office subsector has continued to record a decline in occupancy rates due to the stifled demand. Some of the key contributing factors include companies deferring expansion plans, the hybrid workstyles between work from home (WFH) and working on-site in the office, cutting

3 2 1 0 -1 -2

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2015

2016

2017

Klang Valley

2018

2019

Johor Bahru

2020

2021

George Town Source: NAPIC

Purpose-Built Office Rental Index in Klang Valley, Johor Bahru & George Town (Q1 & Q2 2015 vs Q1 & Q2 2021) Q1 2015

Q2 2015

Q1 2021

Q2 2021

Index

Average Rental (RM, psm)

Index

Average Rental (RM, psm)

Index

Average Rental (RM, psm)

Index

Average Rental (RM, psm)

Klang Valley

116.20

43.12

116.90

43.38

130.80

48.54

130.80

48.53

Johor Bahru

116.60

30.65

117.10

30.78

129.50

34.05

129.70

34.10

George Town

110.90

27.22

110.90

27.22

127.30

31.25

126.90

31.14

HB Perspective 2022

MALAYSIA OUTLOOK 2022

down on space requirements after a headcount reduction and closing down of business enterprises completely. As at Q3 2021, occupancy rates of privately owned purpose-built offices (PBO) in the country declined to 70.8%, continuing the steady decline from 82.4% in 2018, 80.6% in 2019 and 80.2% in 2020. Meanwhile, the rental index for PBOs for the main urban centres of the Klang Valley, Penang and Johor recorded marginal declines of 0.1%, 0.1% and 0.7% respectively in Q2 2021. It is imperative hence for the government and the business community to think out of the box and identify ways to restore the shine back to the office market.

Industrial – Continue Rising Despite the challenging conditions during the Covid-19 pandemic which disrupted supply chains and affected production, certain segments of the industrial sector have benefitted from an increase in demand, both locally as well as overseas. Manufacturers involved in production of healthcare products, electrical & electronics (E&E) equipment, petroleum, chemical, rubber & plastic products, food, beverage and tobacco products have seen an increase in exports. Logistics companies involved in warehousing and transportation have also registered a substantial increase in business due to the rise of online shopping, not forgetting a growing interest in data centres. This has cushioned the fall in demand for industrial properties caused by business contractions suffered during the MCO periods. But amid the rising interests in these industrialised areas during the pandemic, Malaysia’s FDI still fell 55% to RM14.6 billion in 2020 with NAPIC’s data also reflecting the sharp drop of volume and value of industrial property transactions in Malaysia for the year. The Ministry of International Trade & Industry (MITI) however reported a quick rebound in the first nine months of 2021 to RM30.2 billion which more than doubled 2020’s FDI. The positive inflow is mirrored by NAPIC’s data which showed an increase of 29.4% in volume and 19.8% in value of transactions for industrial properties in Malaysia in 1H 2021. Manufacturing 12

HB Perspective 2022

Industrial - Factors to Watch in 2022 • The industrial sub-sector will continue to be driven by the e-commerce sector which has generated demand for distribution hubs, warehousing and logistics facilities which are strategically located near high population areas and served by a good network of highways to enable fast point-topoint delivery to consumers. The MCO has created a huge increase in demand for online purchasing especially for groceries and food. • There has been an increase in interest in putting up data centers. • Matured and sought-after areas will remain popular locations for manufacturers and warehouse operators. • The emergence of an even more infectious and dangerous variant of the Covid-19 pandemic will slow down the economic recovery and disrupt manufacturing activities like the recent discovery of Omicron which has put all countries on alert with Malaysia also tightened its borders to prevent the entry and spread of this new variant. • The 12th Malaysia Plan launched in October 2021 will focus on the following key areas of industry: - Moving the electrical & electronics (E&E) sector up the value chain; - Maximising the full potential of the creative industry; - Establishing a sustainable aerospace industry; and - Realising the potential of the biomass industry.

remained the main contributor followed by the financial, wholesale and retail trade sectors. Malaysia, which has signed the agreement under the Regional Comprehensive Economic Partnership (RCEP), will be the 12th country to implement the agreement in March 2022. RCEP is the world’s largest free trade agreement covering 15 countries with a combined population of 2.2 billion or nearly a third of the world’s population. The ratification of RCEP is expected to bring a lot of trade benefits to Malaysia and provide a boost to the country’s manufacturing industries.

• The progression of the country to implement the strategies drawn up for the Fourth Industrial Revolution (IR4.0) will bring positive spin offs to the industrial property sub-sector. • Malaysia will be implementing the RCEP (Regional Comprehensive Economic Partnership) agreement that it has signed, in March 2022. Industrial – Bright Spots for 2022 • All economic sectors have now been allowed to open after the country entered Phase 4 of the National Recovery Plan (NRP). • The economic slowdown caused by the Covid-19 pandemic appears to have bottomed out as restrictions locally and in overseas markets have been eased further. • Inter-state travel is now allowed and international borders are gradually reopening with VTL (Vaccinated Travel Lane) being established to enable entry into the country with less hassles. • Malaysia’s trade statistics showed that exports have continued to rise month-on-month in 2021 and the trade balance has remained positive. This will provide a boost to the demand for industrial properties. • The increase in inflow of FDIs, especially in the manufacturing sector, in the first nine months of 2021 will hopefully translate into an increase in demand for industrial space/properties.

The state of Selangor continued its domination with 35.7% of the total transactions. Terraced factories formed 32.2% of the total industrial transactions, followed by vacant plots at 27.6% and semi-detached factories at 22.4%. The industrial property market continued to improve in Q3 2021 which saw a 16.2% increase in the volume of transactions and a substantial jump of nearly 26% in the value of the transactions y-o-y.

MALAYSIA OUTLOOK 2022

Hospitality – Rebirth Malaysia’s plan to hold “Visit Malaysia 2020 (VM2020)” was scuttled by the Covid-19 pandemic and as a result, actual tourist arrivals and spending achieved were way below the targets set for the year. Total tourist arrivals for 2020 came up to only 4.3 million which was about 14% of the 30 million target set under VM2020 and more than 83% lower than the 26.1 million tourist arrivals achieved in 2019. Tourist expenditure on the other hand came up to only RM12.688 billion or about 12% of the RM100 billion targeted under VM2020. With travel restrictions in place for most of the year, domestic tourism also took a hit with only 131.7 million local tourists travelling compared to the 239.1 million in 2019. At the same time, domestic tourism expenditure came down by 60.8% from RM103.2 billion in 2019 to RM40.4 billion in 2020. It is however interesting to note that statistics provided by Tourism Malaysia showed Labuan was the only territory that registered a positive 1.2% variance in average hotel occupancy rates between 1H 2019 and 1H 2020 with Terengganu, Kelantan and Sarawak next with the least drop in performance at -15.2%, -17% and -15% respectively. But as travel restrictions were in force for most of the first nine months of 2021, tourist arrivals for the first eight months of the year were down by 90% y-o-y. Based on a report released by the Malaysian Association of Hotels (MAH) in June 2021, hotel occupancy rates have been averaging under 30% per month throughout the year. This is due to the restrictions placed by the government on both interstate travel and international tourist arrivals for most of 2021. MAH expected occupancy rates for Q3 and Q4 2021 to be at 21% and 28% respectively. According to the Association also, the unforgiving pandemic has wiped out around RM6.5 billion of revenue from the hotels in 2020 and another RM9 billion in the first seven to eight months of 2021. Due to the deplorable state of the hospitality business, MAH disclosed that about 120 hotels have closed down either temporarily or permanently nationwide. With most economic sectors having been given a new lease of life after the successful vaccination drive in 2021 and certain real estate sub-sectors showing signs of recovery, the empty space left by the hotel closures may make it a fertile ground for a rebirth of the hospitality industry, barring any major Covid-19 waves that will also curtail travel in 2022.

Malaysia Tourist Arrivals, 2020-August 2021 Month

2020

2021

Jan

2,164,459

8,012

Feb

1,397,912

7,599

Mar

671,084

9,645

Apr

7,546

9,742

May

5,411

9,156

Jun

6,586

6,456

Jul

18,660

6,203

Aug

11,631

8,062

Sep

16,131

n/a

Oct

11,315

n/a

Nov

11,420

n/a

Dec

10,568

n/a

Total

4,334,743

66,896

Source: Dept. of Statistics Malaysia / Tourism Malaysia

Hospitality - Factors to Watch in 2022 • Improvement in the domestic tourism industry with the resumption of interstate travel effective 11 October 2021. • The reopening of international borders beginning with the first international tourism bubble implemented for Langkawi effective 15 November 2021 and the establishment of the Vaccinated Travel Lane (VTL) arrangements starting with Singapore effective from 29 November 2021 and with other countries from 1 January 2022 which were then halted due to Omicron in late December 2021. • The high vaccination rates achieved by the government will improve overall confidence and boost domestic as well as international travel. • Some hotels approved as quarantine centres for returnees from overseas or Covid-19 cases with mild symptoms have managed to fill up otherwise empty rooms. Hospitality – Bright Spots for 2022 • With most of the population being fully vaccinated and proper SOPs in place, tourists will feel safer to travel locally. • Allocations by the Government under Budget 2022 to help the

local tourism industry will provide a welcoming boost to this important economic sector. • Hotels have implemented SOPs to prevent the spread of the Covid-19 virus and this will provide some assurance and peace of mind to hotel guests. • Air fares are currently higher than usual as airlines adjust to the higher costs incurred in implementing Covid-19 protocols and SOPs. With the expected increase in passengers in the coming year, the airlines may be able to bring down costs and make air travel more accessible again. • Malaysia Airports Bhd (MAHB) has reported a recovery of passenger traffic for its network of airports in the country for November 2021 to 2.3 million, the first time it has surpassed the 2 million mark since the onset of the Covid-19 pandemic in April 2020. It also reported a surge in domestic aircraft movements which grew 43% to 27,084 in November from the 18,966 recorded in October. This is an indication that domestic tourism is on the road to recovery and augurs well for the hospitality industry.

HB Perspective 2022

MALAYSIA OUTLOOK 2022

Average Occupancy Rates of Hotels in Malaysia, Jan–Jun 2019/20 State

2019 (%)

2020 (%)

Decline (%)

Kuala Lumpur

56.5

27.8

-28.8

Putrajaya

61.4

42.6

-18.8

Selangor

53.1

29.2

-23.9

Penang

54.6

22.4

-32.2

Perak

39.9

19.5

-29.4

Kedah

53.6

27.0

-26.6

Perlis

33.2

19.4

-13.8

Negri Sembilan

51.5

22.6

-28.9

Melaka

50.7

18.3

-32.4

Johor

56.3

29.9

-26.4

Pahang

78.5

30.8

-47.7

Terengganu

36.4

21.2

-15.2

Kelantan

43.0

26.0

-17.0

Sabah

67.4

24.2

-43.2

Labuan

41.5

42.7

1.2

Sarawak

40.5

25.5

-15.0

Malaysia

56.6

27.8

-28.8

Source: Tourism Malaysia

Hotel Occupancy Rates (Jan-Jun 2021) 30 27

25 21

18 17

JAN

FEB

MAR

APR

MAY

JUN Source: MAH

Average Hotel Occupancy in 2021 30 27%

28%

27%

25 21%

21%

18% 17%

14%

JAN 2021

FEB 2021

MAR 2021

APR 2021

MAY 2021

JUN 2021

Q3 2021

Q4 2021

Source: MAH / The Edge

HB Perspective 2022

KEDAH OUTLOOK 2022

KEDAH – CLAMOURING FOR A BETTER 2022 Factors to Watch in 2022 • The Economic Prosperity Thrust under the Kedah State Development Plan 2035 (KEDAH 2035) will guide the economic roadmap of the state including attracting foreign direct investments. • The new airport in Kulim located in Sidam Kiri near Kuala Ketil and about 12km from Sungai Petani will have potential multiplier effects to all other economic sub-sectors in the state when completed. Bright Spots in 2022 • The current 1.75% low overnight policy rate (OPR). • The new airport in Kulim sited on 1,700-ha has the propensity to raise economic activities in Kedah and create 20,000 jobs. Outlook for 2022 • The residential sub-sector is expected to improve in 2022. • Kedah’s commercial market is anticipated to be steady in 2022 with a possibility of improvement. • The industrial sub-sector is looking at a steady pace with recovery potential in 2022.

Data gathered from NAPIC showed that Kedah’s property market for the first nine months of 2021 registered a decline of 16.6% in volume but rose 17.4% in value when compared to the same period in 2020. This is largely due to the strict MCO imposed state-wide until the end of August where property developers, estate agents and bank officers were also impacted and only able to return to the office to fully operate from 1 September 2021. The compounded effect has been exhausting and detrimental to the property market in Kedah after experiencing the negative setback right from the first half of 2021 and looking to do worse in the second half.

stocks from the previous launches with some sporadic new launches taking place over the course of 2022.

Due to the lengthy lockdowns, many of the small and medium sized developers have temporarily suspended their planning submissions in 2020 and 2021. Although the self-imposed suspension may seem counter-productive, the positive side to this is that it may help to avert a potential oversupply situation in the various sub-sectors of the market like residential, commercial/office, retail, hospitality and industrial. The bright side out of this conundrum is Kedah’s overhang property numbers is likely to not increase as significantly in 2022 because of the lack of new submissions. But for developers to continue business, they are likely to look at clearing existing

When comparing the residential subsector’s volume of transactions for the first nine months in Kedah, the trend has been declining since 2019. The volume of transactions had in fact gone down by 5% from 2019 to 2020 and a further 11.7% from 2020 to 2021, reflecting the forecast made for 2021. However, it should be noted that the value of transactions has gone on the opposite direction since 2019 albeit rising at a slower rate, recording a slight improvement of 5% from 2019 to 2021, owing to the higher price tags of properties being transacted. Single and double storey terrace houses were the most transacted type of residences.

Volume & Value of Residential Transactions in Kedah (Jan-Sep 2019 to 2021) 10k

9157

8704 7688

8k 6k

2019

1957.36

2k 0

Volume

2020 2020.44

2021

To reignite sentiments in the state, the new airport in Kulim located in Sidam Kiri near Kuala Ketil and about 12km from Sungai Petani will stand as one of the rays of hope in 2022 with potential multiplier effects to all other economic sub-sectors in the state. It is also expected to generate robust activities in the commercial/office, retail, industrial and hospitality markets.

Residential Overview & Outlook

Towards Q4 2021, there were visible signs of increased activities in the residential market and this heightened trend is expected to continue into 2022 as property buyers are looking to lock in present day values in the light of the rising inflation impacting costs of construction materials, labour etc. With mounting market pressures, Kedah’s residential subsector is expected to improve in 2022 although not back to the pre-pandemic levels as experienced before 2020.

2054.54

Value (RM Million) Source: NAPIC

HB Perspective 2022

KEDAH OUTLOOK 2022

Commercial Overview & Outlook

HB Perspective 2022

200,001 300,000

300,001 400,000

400,001 500,000

500,001 1,000,000

70.44

26.33 100,001 200,000

26.91

271.26

226.25

201.47

279.79

190.73

230.10

457.07

414.88

405.89

558.00

482.67

580.78

355.06

473.30

512.55 0100,000

1,000,001 & Above Source: NAPIC

Volume & Value of Commercial Transactions in Kedah (Jan-Sep 2019 to 2021) 1,200 2020

2019

1,000 800

2021

1,001.06

713 553

600

549

400

297.97

237.52

200 0

Volume

Value (RM Million) Source: NAPIC

Volume of Commercial By Price Range in Kedah (Jan-Sep 2019 to 2021)

144

161 130

138

81 65

100

104

150

148

200

0100,000

100,001 200,000

200,001 300,000

2020

2021

300,001 400,000

400,001 500,000

500,001 1,000,000

2019

62.89

112.94

100

93.00

200

2021

Overall, Kedah’s commercial market can expect to hold steady with some possibility of an uptick in 2022, and improving from there to pre-pandemic levels in the coming years.

300

For investors keen to take a look at Kedah’s commercial market, it is worth noting that the retail sub-sector has a slight edge over the hospitality sector although they are tightly intertwined to serve the general retail and tourism markets.

400

Action on the ground for the commercial sub-sector depends largely on the recovery of the market from Covid-19. If and when the pandemic is fully contained and eradicated, Kedah’s commercial market can expect to chalk up some robust activities in 2022 along with the recent improvements seen in the retail sub-sector. And speaking of retail, Kedah’s retail sub-sector has had better days than in 2021 with consumers fearing the infectious virus and made the conscious effort to limit their visits to the stores outside. This has led to a subdued atmosphere in the retail malls and outlets which consequently impacted the well-being of Kedah’s hospitality sub-sector throughout the year with only Langkawi making headlines by championing the country as hosting the first domestic travel bubble from 16 September 2021.

500

2020

2019

The value of transactions however threw in some surprises with a giant leap of 321% in the first nine months of 2021 compared to the corresponding period in 2020 after a 20% negative growth over the same period from 2019 to 2020. The stark contrast from RM237.5 million to RM1 billion is due to a shopping mall in Kota Setar which was transacted at a value of RM750 million. The most popular range of commercial properties remained in the RM500,001 to RM1 million price bracket.

600

RM Million

Like the residential market, the volume of Kedah’s commercial sub-sector also registered declines in the first nine months of 2021 against the same period in 2020 and 2019, going down by 22% from 2019 to 2020 but declining slower at 0.7% from 2020 to 2021.

Value of Residential Transactions By Price Range in Kedah (Jan-Sep 2019 to 2021)

1,000,001 & Above Source: NAPIC

KEDAH OUTLOOK 2022

Industrial Overview & Outlook

Perhaps influenced by the market setback, Kedah’s industrial properties has not experienced innovative adoptions like those seen in Klang Valley with manufacturing, storage and distribution continuing as the primary functions of the industrial units. Despite the gloomy market in 2021, Kedah received RM43.6 billion in foreign direct investments (FDI) early on in the first half of 2021. Then later in the year, the state also announced its anticipation to receive at least RM10 billion annually in FDI from 2022 onwards as part of the state’s vision to encourage take-up at the many industrial facilities that Kedah has such as the Kulim Hi-Tech Park (KHTP), the Special Boundary Economy Zone (SBEZ) in Bukit Kayu Hitam, the Kedah Rubber City (KRC) and existing industrial areas in Gurun, Bukit Selambau and Sungai Petani. The Kulim Technology Park Corporation (KTPC) industrial area

250 200

184.40 161.00

156.00

150

139.50

123.00

100 50 0

Volume 2019

2020

Value (RM Million) 2021

Source: NAPIC

Value of Industrial By Price Range in Kedah (Jan-Sep 2019 to 2021)

2020

2019

250

270.03

300 2021

140.09

200

97.82

150

0100,000

100,001 200,000

200,001 300,000

300,001 400,000

400,001 500,000

26.07

25.70

16.19

9.64

7.50

9.85

2.39

4.37

3.11

3.37

2.59

2.99

1.89

2.74

1.50

100 1.77

Nevertheless, the majority of the industrial transactions in 2021 continued to be above the RM1 million range, a trend spotted since 2018. In terms of property type, the market in 2021 was led by the vacant industrial plots followed by terrace factories/warehouses and detached factories. Areas which had the highest transactional numbers were in Kota Setar, Kuala Muda and Kulim.

307.89

300

0.46

The rather surprising negative trend have certainly dampened the market atmosphere given the encouraging prospects from several large-scale projects which may act as catalysts such as the Rubber Industrial Park (or known as The Kedah Rubber City), Sidam Logistics, Aerospace, and Manufacturing Hub (SLAM), Kedah Science and Technology Park (KSTP) located in the Bukit Kayu Hitam SBEZ, just to name a few. It appears that the positive vibes generated from these projects have not resulted in any substantial traction to push the market.

350

1.72

There was a downtrend in the volume and value of industrial transactions in Kedah, declining by 27% and 32% respectively in the first nine months of 2021 compared to the same period in 2020. Before this, the negative trend had also impacted the sub-sector where the volume and value eroded by 3% and 40% over the same period in 2019 to 2020.

Volume & Value of Industrial Transactions in Kedah (Jan-Sep 2019 to 2021)

500,001 1,000,000

1,000,001 & Above Source: NAPIC

will also undergo a 695 acres expansion to meet demand from the investors and is projected to create 15,000 new jobs. 2021 saw the state concluding the year with a total of RM43.6 billion in FDI as it continued attracting new investments to the state after the announcement made for the first quarter of 2021. Out of this total, RM42.5 billion have been channelled into the manufacturing sector and RM1.1 billion in the services sector and key industries such as renewable energy by Risen Solar Technology Sdn Bhd. Other big investments include from Syarikat Munzing Malaysia Sdn Bhd with RM55 million and Syarikat SP Mega Mineral Sdn Bhd with RM29 million.

Perhaps, if the depressing days of Covid-19 can be totally over in 2022 with the virus being brought under control or in the best-case scenario, almost wiped out altogether, Kedah’s industrial subsector can benefit from all the promises that the state has rolled out to the market. If and when this materialises, Kedah’s industrial sub-sector can look forward to a steady pace of recovery in 2022 from the drop experienced in the preceding two years.

HB Perspective 2022

PENANG OUTLOOK 2022

PENANG LOOKING POSITIVE IN 2022 For the first nine months of 2021, Penang recorded 10,521 property transactions worth about RM5.4 billion which translates into an increase of 13.9% in terms of volume and 33.7% in terms of value of transactions compared to the same period in 2020. Penang is among only a handful of states in the country that charted a growth in its volume of transactions and occupies the higher quartile in the country for value of transactions for the period under observation in 2021. The residential sector continued to dominate the overall property market transactions with a lion share of 76.72% followed by the commercial and agriculture sub-sectors at 7.50% and 6.91% respectively. In terms of value of transactions, the residential subsector contributed 56.42% of the total value of transactions followed by the industrial and commercial sub-sectors at 16.44% and 13.94% respectively. With market sentiments having returned with some confidence especially in the business sector after the successful National Covid-19 Immunisation Programme, the performance for Penang’s property market in 2021 is anticipated to be stable and identical to what was recorded in 2020. The Penang brand as an industrial and tourism hotbed has given it some reasons to look forward to a stronger 2022 from the devasting blows of the Covid-19 pandemic. Firstly, with Intel Corp’s commitment to build a US$7 billion (RM30 billion) new production facility at Bayan Lepas FTZ 3 alongside the many other illustrious industrial success stories and secondly, for being hailed as one of “15 Best Islands in the World to Retire In” by global retirement and relocation portal, International Living. These are positive developments that can fan the Penang name further into the global markets and attract not just the leisure tourists and

HB Perspective 2022

Factors to Watch • Removal of RPGT (Real Property Gains Tax) for property disposal made from the sixth year. • RM2 billion allocation under the Housing Credit Guarantee Scheme to assist gig workers and small traders without steady income to apply for home financing. Bright Spots • Intel Corp’s US$7 billion (RM30 billion) planned investment into a new production facility at Bayan Lepas FTZ 3 is expected to create over 4,000 jobs and more than 5,000 construction jobs in the country. • Penang Development Corporation (PDC) is planning to set up two Global Business Services (GBS) buildings with built-up area of about 300,000 sq ft each in the state after the successful first GBS, an MSCstatus building renamed as GBS@ Mayang, to meet the growing needs of the GBS market. • Penang named one of “15 Best Islands in the World to Retire In” after Malta and Mallorca in Spain by International Living, a website that covers global retirement or relocation opportunities,

retirees but also foreign direct investments (FDI) and thereby creating more jobs and business opportunities in the state. The good news also continued with Penang Development Corporation’s (PDC) plan to set up two more Global Business Services (GBS) buildings with total net lettable area of 300,000 sq ft each as potential office venues for multi-national corporations to setup offices in. With this shall come jobs and economic multiplier effects for the state.

• SEMICON Southeast Asia 2022, will be held in Setia SPICE Arena & Convention Centre from 21 to 23 June 2022. The trade show will shine a spotlight on the supply chain disruptions that have battered the semiconductor industry and an increased emphasis on environmental and sustainability challenges that industry players need to grapple with. • Travel Safe Alliance Malaysia (TSAM) partnered with the Penang State Executive Council Office for Tourism and Creative Economy (PETACE) to attract tourists with the aim of economic recovery while prioritising safety and hygiene. • The International Coordinating Council of UNESCO’s Man and the Biosphere Programme officially recognised Penang Hill (Bukit Bendera) as a biosphere reserve and inducted into the World Network of Biosphere Reserves on 15 September 2021, becoming Malaysia’s third biosphere reserve after Tasik Chini in Pahang (2009) and Banjaran Crocker in Sabah (2014).

PENANG OUTLOOK 2022

Residential Overview & Outlook

In accordance with the House Price Index compiled and published by NAPIC, the all house price index has dropped slightly by about 1.54% to 192.1 as of Q3 2021 from 195.1 in Q3 2020. By types of property, semi-detached houses saw the highest decline of about 6.60% at 215.0 points (Q3 2020: 230.2), followed by high-rise residential which dropped by approximately 2.3%. For detached houses, the price index has gone up by 4.79% at 233.9 compared to 223.2 in Q3 2020. Penang has the second highest number of residential overhang in the country with 4,638 units as at Q3 2021 although when it comes to the service apartments segment which are usually commercial titled, the state is not among the top contributors to the national overhang numbers. Some of the key projects that are currently ongoing in Penang Island are contributing more than 12,000 units of residences with the larger ones like Quay West in Bayan Baru by Asia Green Group offering 1,013 condominium units. In the affordable price range category, Havana Beach Residences in Sungai Ara and Ideal Residency in Bukit Gambier by the Ideal Group, TreeO in Sungai Ara by the Hunza Group and The Zen in Bayan Bay by Asia Green Group are projects with more than 1,000 residential units each.

15k

Volume (Units)

35k

Value (RM Million)

12k

30k 25k

20k 6k

15k 10k

Value (RM Million)

40k

Volume (Units)

Penang’s residential sub-sector recorded transactions of 9,192 units in the first nine months of 2021 worth a total of RM4.08 billion. Demand continued to be focussed on residential units priced at RM500,000 and below which accounted for 74.5% and 42.1% of the total volume and value of residential property transactions in the state respectively.

Total Volume & Value of Property Transactions in Penang

5k 0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Q3 2021 (P)

0 Source: NAPIC

Volume of Property Transactions by Sub-Sector in Penang (Jan-Sep 2021) Development 5.93% Agriculture 6.91% Industrial 2.94% Commercial 7.50% Residential 76.72% Source: NAPIC

Property Transactions Value by Sub-Sector (Jan-Sep 2021) Development 8.65% Agriculture 4.55%

Industrial 16.44% Residential 56.42% Commercial 13.94%

Source: NAPIC

HB Perspective 2022

PENANG OUTLOOK 2022

Commercial Overview & Outlook (Purpose-Built Office)

250 (Weight 2010 = 100)

As at Q3 2021, there were 145 privately owned stratified purpose-built office (PBO) buildings located on Penang Island with a total space of about 681,400 sq metres. Of this total, 121 buildings with about 64% of the total space (approximately 437,000 sq metres) are located in the Georgetown area with 510,230 sq metres. The occupancy rate of PBO on Penang Island remained relatively healthy and stable at about 85%, up from 79.4% in Q3 2020.

Residential Property Price Index by Types in Penang (2009–2020)

200 150 100

For stratified office space located within the secondary office buildings, the prices transacted in the secondary market were generally below RM350 per sq ft and these buildings are normally aged (built in the 1980’s), suffers from a lack of maintenance with outdated facilities, have limited car parking space and larger floor areas compared to the modern PBO buildings. Average market prices of stratified PBOs have in fact been declining since 2019 with the prime office buildings at RM520 per sq ft in Q3 2021 matching prices in 2017 and for the secondary office building at RM320 per sq ft levelling prices between 2015 to 2016. In terms of rental rates, stratified PBO space located within prime office buildings is able to command a monthly rental of between RM2.50 per sq ft and RM3.50 per sq ft (RM2.00 per sq ft to RM3.50 per sq ft in Q3 2020) whilst those located in the secondary office buildings is between RM1.80 per sq ft and RM2.50 per sq ft (up slightly from RM1.30 per sq ft and RM2.00 per sq ft). There was no PBO building completed in 2021 and three PBO buildings were under construction as at Q3 2021, all located in the Georgetown area. Upon completion, these buildings will offer an approximate 56,500 sq metres of office space into the office sector on Penang Island.

HB Perspective 2022

Semi-Detached

50 0

Average prices of stratified office space located within prime PBO buildings such as Gurney Tower, Menara Northam, Maritime Piazza and E-Gate were transacted between RM450 per sq ft and RM750 per sq ft depending on the location, size (floor area), layout, condition (renovation) and view of each unit.

Terraced

All House

2009

2010

2011

2012

2013

2014

2015

2016

2017

High-Rise

Detached

2018

2019

2020

Q3 2021 (P)

Source: NAPIC

On-Going Notable Residential Developments on Penang Island Project

Developer

Location

No. of Units

IJM Group

Bukit Jambul

410

Condominiums The Terraces Zen 6

Asia Green Group

Bayan Bay

730

Marriott

Boon Siew Group

Persiaran Gurney

302

IJM Group

Gelugor

456

The Sun

Sepakat Mewah Sdn Bhd

Sungai Nibong

195

Montage

Prisma Bumiraya Sdn Bhd

Sungai Nibong

282

Hunza Group

Bayan Baru

846

Asia Green Group

Bayan Baru

1,013

Ideal Group

Sungai Ara

1,342

Prisma Development Sdn Bhd

Balik Pulau

378

Potential Dual Sdn Bhd

Sungai Ara

750

Hunza Group

Sungai Ara

1,240

Granito

Boon Siew Group

Tanjung Bungah

980

Grace Harmony

Nova Mulia Group

Jelutong

444

Ideal Residency

Ideal Group

Bukit Gambier

1,218

Asia Green Group

Bayan Bay (2023)

1,200

Mezzo

Muze at PICC Quay West Affordable Home Havana Beach Residences Quinton Fairview Residences TreeO

The Zen

Source: Henry Butcher Research

PENANG OUTLOOK 2022

Purpose-Built Office Supply in Penang Island (as at Q3 2021) No. of Building

Location

Total Existing Space Space Occupied (‘000 sq m) (‘000 sq m)

Occupancy Rate (%)

Georgetown

121

510.23

436.91

85.6%

Bayan Baru/Sungai Nibong/Gelugor

105.04

89.96

85.6%

Green Lane

23.83

22.59

94.8%

Jelutong

10.93

9.32

85.2%

Tanjong Tokong

21.61

13.85

64.1%

Bandar Tanjung Pinang

9.76

8.14

83.4%

145

681.400

580.770

85.2%

Penang Island

Source: NAPIC Report

Average Market Prices of Stratified Purpose-Built Office Space on Penang Island 600 480

RM / SQ. FT.

500

520

500

530

550

530

520

420

400

370 320

300

273

293

330

350

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

3Q 2021

200

100

350

320

253

259

200

340

330

255

270

190

220

200

280

300

250

224

210

Source: NAPIC

Commercial (Retail)

Retail Complexes on Penang Island No. of Building

Total Existing Space (‘000 sq m)

Space Occupied (‘000 sq m)

Occupancy Rate (%)

George Town

470.99

362.29

76.9

Tanjung Bungah

6.50

100.0

Sungai Nibong

105.49

104.59

99.1

Pulau Tikus

52.13

51.59

99.0

Bayan Baru Town Center

80.48

51.12

63.5

Bukit Jambul

72.52

66.33

91.5

Green Lane

45.31

43.12

95.2

Jelutong

21.29

17.18

80.7

Batu Uban

7.16

100.0

Tanjong Tokong

117.15

76.82

65.6

Air Itam/Relau

37.24

29.73

79.8

Sungai Dua P. Pinang

33.01

20.58

62.3

Batu Ferringhi

5.07

4.34

85.6

Bandar Baru Air Putih/ Balik Pulau

7.43

100.0

1,061.77

848.78

Location

Penang Island

As of Q3 2021, there were 68 retail complexes (comprises of shopping centers, arcade and hypermarket) located on Penang Island offering a total retail space of about 1.062 million sq ft (98,663 sq metres). A majority of the retail complexes are located in the Georgetown area, with 22 buildings and accounting for about 44.4% of the total retail space, followed by Tanjong Tokong and Sungai Nibong with about 11% (117,150 sq metres) and 10% (105,490 sq metres) respectively. The overall occupancy rate of retail complexes located on Penang Island was recorded at about 80%.

79.94 Source: HB Research

HB Perspective 2022

PENANG OUTLOOK 2022

Occupancy Rate of Selected Prime Shopping Malls Located on Penang Island

Penang Island (Average)

Average Occupancy Rate

85%

78%

Gurney Paragon

97%

Queensbay

94%

Gurney Plaza

Industrial

The market prices of vacant industrial land 100% in Bayan Lepas Industrial Park located on Source: HB Research Penang Island are recorded at between RM80 per sq ft and RM140 per sq ft depending Future Supply of Notable Shopping Mall Developments on the exact location, size (land area) and Located on Penang Island the remaining unexpired leasehold period. Rental rates of vacant industrial land located in Expected Approximate Project Location this industrial park on the other hand ranged Completion Floor Area (sq ft) between RM0.30 per sq ft and RM0.60 per sq Penang Times Square ft whilst the rental rates of industrial premises Georgetown 2022 350,000 (Phase 3) are in the range of between RM1.50 per sq ft Sunshine Mall Air Itam 2022 815,000 and RM2.00 per sq ft. 0%

20%

40%

60%

80%

The Light Waterfront Mall

Gelugor

N/A

870,000

Penang World City

Gelugor

N/A

1,000,000

Sunway Valley City

Paya Terubong

N/A

1,000,000

Total

There were a number of notable transactions of residential development land, commercial buildings and major industrial premises (above RM10 million) on Penang Island in 2021 and these are summarised in the table below.

4,035,000 Source: HB Research

Industrial Property Stock on Penang Island District

Terraced

Semi-Detached

Detached

Flatted Factory

Industrial Complex

Total

269

476

832

Timur Laut Barat Daya

429

284

883

Penang Island

698

363

499

1,715 Source: NAPIC

2021 Notable Transactions (above RM10 Million) on Penang Island Type of Property

Land Area

Tenure

Date of Transaction

Consideration

A parcel of seafront development land

19,792sf

Freehold

Feb 2021

RM11mil

Taman Jesselton

A 2-storey detached house

20,396sf

Freehold

Feb 2021

RM12.5mil

Taman Jesselton

Residential development land

36,553sf

Freehold

Mar 2021

RM16.888mil

Off Jalan Relau

Residential development land

52,528sf

Freehold

Aug 2021

RM12.081mil

A parcel of Residential development land

97,715sf

Freehold

Apr 2021

RM14.657mil

A parcel of beachfront development land

30,462sf

Freehold

Jan 2021

RM13mil

2-storey commercial building

32,149sf

Freehold

Jan 2021

RM36.2mil

An industrial premises

444,137sf

Leasehold

Jan 2021

RM31.8mil

Location Residential Seri Tanjung Pinang

Along Jalan Gertak Sanggul Commercial Along Jalan Batu Ferringhi Along Lebuh Pantai Commercial Jalan Kampung Jawa

Source: NAPIC

HB Perspective 2022

PERAK OUTLOOK 2022

PERAK – GRADUAL RECOVERY IN 2022 Perak’s overall property market transaction experienced an 8.5% drop in volume in the first nine months of 2021 but its value of transactions rose by 6.7% compared to the same period in 2020. The decrease in volume was from 25,564 units in 2020 to 23,383 units in 2021 whereas over the same period of the first three quarters, its value of transactions went from RM5.4 billion to RM5.8 billion. Thus far, Perak’s property market has experienced a gradual resuscitation in almost all sub-sectors with the residential and commercial prices showing stability and easing while industrial saw improvement in prices. To spur the market, the Perak government has formulated some of the most attractive and tangible assistance to her residents and buyers, this includes the RM1.2 billion allocation for comfortable and quality housing especially to the low-income group which encompasses RM500 million to build 14,000 units low-cost housing under Program Perumahan Rakyat, RM315 million for the construction of 3,000 units of Rumah Mesra Rakyat by Syarikat Perumahan Nasional Bhd, RM125 million for the maintenance of low cost and medium-low stratified housing and the RM310 million for the Malaysia Civil Servants Housing Program (PPAM). The state government has also provided full stamp duty exemption on instruments of transfer and loan agreement for firsttime home buyers until 31 December 2025, an extension of five years for stamp duty exemption on loan agreement and instruments of transfer given to rescuing contractors and the original house purchasers and also the government’s collaboration to extend the Rent-to-Own Scheme which involves 5,000 units of PR1MA houses with a total value of more than RM1 billion. Growth in Perak in 2H 2021 is expected to be better in line with the resumption of economic activities across the country, improvement in the labour market, continuing policy support and expansion in external demand, together with the efficacy of Covid-19 vaccinations and society’s adherence to the SOPs in the new norm.

Factors to Watch in 2022 • RM1.5 billion allocation for lowincome group housing projects. • Optimal management of Malay Reserved Land and government land by renting out for agricultural and business projects. • The Silver Valley Technology Park in Hulu Kinta within 15km of Ipoh City Centre is earmarked as Southeast Asia’s first Digital Disruptive Technology Park focusing on high value manufacturing and digital economy activities with a target to attract private investments worth RM14 billion and create about 13,000 jobs. • Mixed development project of 192.23ha at Batang Padang by Ageson Holdings Sdn Bhd and Perak Menteri Incorporated, includes government agencies & administration unit, industrial, commercial and residential with a GDV of RM879.9 million expected to be completed within 15 years. • Joint development affordable housing project in Tapah on 92.97ha with a GDV of RM295 million between Lagenda Properties Bhd’s subsidiary and MajuPerak Holdings Bhd’s subsidiary comprising 1,374 single storey terrace houses, 264 two storeys shop houses, petrol station, hypermarket and office building. • Potential to expand the RM105 million natural gas pipeline network with a new 62km link from Kampung Kuala Bikam, Bidor to Proton City in Tanjung Malim. • Plans of a new airport and extend Sultan Azlan Shah Airport’s (LTSAS) runway to meet demand from domestic investors and medical tourists. Bright Spots in 2022 • The current 1.75% low overnight policy rate (OPR). • RM1.2 billion government allocation for comfortable and quality housing especially for low-income group which includes RM500 million to

build 14,000 low-cost houses under Program Perumahan Rakyat, RM315 million for 3,000 units of Rumah Mesra Rakyat by Syarikat Perumahan Nasional Bhd, RM125 million for maintenance of low cost & mediumlow stratified housing including assistance to repair dilapidated houses and those damaged by natural disasters and RM310 million for the Malaysia Civil Servants Housing Program (PPAM). • Full stamp duty exemption on instruments of transfer and loan agreement for first-time home buyers extended to 31 December 2025, effective for sale and purchase agreements executed from 1 January 2021 to 31 December 2025. • Stamp duty exemption on loan agreement and instruments of transfer given to rescuing contractors and the original house purchasers is extended for 5 years, effective for loan agreements and instruments of transfer executed from 1 January 2021 to 31 December 2025 for abandoned housing projects certified by the Ministry of Housing and Local Government (KPKT). • Government to collaborate with selected financial institutions to provide Rent-to-Own Scheme and will be implemented until 2022 involving 5,000 units PR1MA houses valued at more than RM1 billion. Outlook for 2022 • The residential sub-sector will see a gradual growth in volume with stable prices. • The commercial sub-sector is expected to gradually recover in 2022. • The industrial sub-sector should be encouraging in light of the state government’s interest to attract foreign direct investments that are in line with the Fourth Industrial Revolution.

HB Perspective 2022

PERAK OUTLOOK 2022

20k 16,360

15,532

16,376

HB Perspective 2022

3,596.45

3,148.44

Volume

3,679.33

Value (RM Million) Source: NAPIC

4,084

100,001 200,000

200,001 300,000

500,001 1,000,000

81 0100,000

731

563

528

400,001 500,000

764

669

300,001 400,000

750

1,636

2021

2,074

1,962

2020

2019

4,278

3,194

4,010

4,676

4,616

4,999

Value of Residential Transactions By Price Range in Perak (Jan-Sep 2019 to 2021)

1,000,001 & Above Source: NAPIC

Residential - Overview 2021

Most of the transactions that took place in 2021 were below RM100,000 and between RM100,001 to RM300,000 price bracket. Single storey houses were the most popular followed by vacant residential plots and double storey terrace houses. In terms of locations, most of the transactions took place were Kinta, Manjung and Larut Matang.

2021

10k

There were slight growths in the volume and value of transactions for the residential sub-sector in Perak for the first nine months of 2021 compared to the same period in 2020 at 0.1% and 2.3% respectively. This comes on the back of a higher growth in the same period the year before compared to 2019 at 5.3% and 14.2% respectively.

2020

2019

15k

4,748

The optimal management of Malay Reserved Land and government land by renting out for agricultural and business projects are also Perak’s way of thinking-outof-the-box. Other notable projects include the mixed development on 192.23 hectares at Batang Padang by Ageson Holdings Sdn Bhd and Perak Menteri Incorporated with a GDV of RM879.9 million, affordable housing project on 92.97 hectares in Tapah with a GDV of RM295 million, the potential expansion of the RM105 million natural gas pipeline network with a new 62km link from Kampung Kuala Bikam, Bidor to Proton City in Tanjung Malim and the possibility of constructing a new airport including the extension of Sultan Azlan Shah Airport’s (LTSAS) runway.

Volume & Value of Residential Transactions in Perak (Jan-Sep 2019 to 2021)

3,743

As 2022 will be faced with the end of loan moratorium and replaced with targeted loan moratorium to continue providing borrowers with further assistance, the country will also be pressured with rising inflation, as are markets globally. But not all is lost in the Perak state given her bold ambition to be part of the Fourth Industrial Revolution economy through the Silver Valley Technology Park, dubbed Southeast Asia’s first Digital Disruptive Technology Park. This advanced thinking industrial park will be focusing on high value manufacturing and digital economy activities with an expectation to attract RM14 billion of private investments and create about 13,000 jobs.

The statistics showed that there was a massive drop of 83% in new launches in the first half of 2021 compared to the same period in 1H 2020. Most of the launches in 1H 2021 were two to three storeys terrace dwellings. Overhang residential on the other hand showed a reduction in volume and value. The overall trend is expected to have continued until the end of 2021. In terms of location, in Central Perak, investors can look at Bandar Seri Botani, Bandar Sunway Ipoh, Bandar Meru Raya while in West Perak, potential areas are Batu Gajah, Bandar Seri Iskandar, Manjung. Over in South Perak, there are Tanjung Malim, Tapah, Teluk Intan–Bagan Datuk and in North Perak, choice locations are in Taiping and Kamunting.

The year 2022 is expected to see a gradual growth in volume with stable prices as developers are likely to concentrate on clearing existing stock and also gradually release some held back launches. But with new planned supply anticipated to grow in double digits with moderate sale performance, Perak’s overhang residential numbers are expected to rise in 2022.

PERAK OUTLOOK 2022

Commercial, Hospitality and Retail Overview & Outlook

2020

2019

2021

1,173 990.28

900 634.43

569.95

600 300 0

Volume

Value (RM Million) Source: NAPIC

329 272

100

130

172 132

156

210

184

154

259

237

224

2021

147

150

234

200

229

With the re-opening of domestic tourism stipulated with strict SOPs and the incentive of a RM1,000 income tax relief for domestic holiday accommodations, Perak’s retail and hospitality sub-sectors are expected to undergo a gradual recovery.

300 250

2020

2019

350

357

Volume of Commercial By Price Range in Perak (Jan-Sep 2019 to 2021) 400

With incremental crowd seen at the shopping malls on a daily basis, performance of the retail sub-sector is expected to return to pre-Covid-19 level over time. The issue of Covid-19 will however still be hovering in the horizon and as such, it is crucial for all stakeholders to observe the SOPs to ensure the possibility of a Covid-19

1,341

1,200

In Perak, purpose-built offices are mainly owner occupied or occupied by government agencies. All other commercial users in the market tend to operate from the shop lots and shopoffices.

Performance of the leisure segment is highly dependent on the arrival of foreign tourists in 2021 and since the international borders have not really been fully opened, the state government has set a target to receive three to five million domestic travellers by 2021. According to NAPIC, a total of RM25.9 million has been allocated for the restoration of tourism facilities and maximising the potential of the tourism industry and in line with this, tourist facilities such as Lata Tebing Tinggi in Selama, Taiping Zoo, Taman Alam Kinta in Kampar and Kellie’s Castle in Batu Gajah have been the beneficiaries of the upgrading works.

1,491

209

Unlike the big cities such as Kuala Lumpur, Perak’s commercial sub-sector only experienced a mild and short-term impact during the lockdowns that compelled the workforce to work from home. There were nevertheless increased activities at the official business premises with people returning to their offices after the lockdowns were lifted.

1,500

137

Over in the commercial sub-sector, both the volume and value of transactions experienced some improvement in performance in the first nine months of 2021 by growing 14.3% and 11.3% respectively. This however still lags behind the performance recorded in the pre-pandemic days of 2019.

Volume & Value of Commercial Transactions in Perak (Jan-Sep 2019 to 2021)

50 0

0100,000

100,001 200,000

200,001 300,000

300,001 400,000

400,001 500,000

500,001 1,000,000

1,000,001 & Above Source: NAPIC

recurrence remains low. Up until 1H 2021, rental rate seems to have sustained while the overall occupancy rate for shopping complex in Perak experienced only a minor drop of 0.1%. Although hospitality has a better chance of a quicker revival in Perak owing to domestic tourism and the pent-up desire to travel again by Malaysians after the lengthy lockdowns, the retail sub-sector is where property investors should be paying attention to if they are considering investing between the two considering its ability to fetch rental income while international tourist arrivals are still limited.

Those looking at hospitality potential may consider Ipoh City Centre, Lumut, Munjung, Pangkor Island, Taiping, Teluk Intan, Bagan Datok, Gopeng and Belum Rainforest. For retail, there are Botani Village, Aeon Kinta City, Lotus Hypermarket, Ipoh Parage, Aeon Manjung, Aeon Kamunting and Taiping Mall. Like the residential sub-sector, the commercial property market is also expected to gradually recover in 2022.

For investors looking to make an entry into the market, some potential locations for commercial offices include Ipoh SOHO, Greentown, Canning, Simpang, Taiping, Kamunting, Parit Buntar, Manjung and Teluk Intan. HB Perspective 2022

PERAK OUTLOOK 2022

Industrial Overview & Outlook

2020

420.38

2021

322 287

300

281.04

254

218.46

200 100 0

Volume

Value (RM Million) Source: NAPIC

Value of Industrial By Price Range in Perak (Jan-Sep 2019 to 2021)

2021

0100,000

100,001 200,000

200,001 300,000

25 300,001 400,000

2020

2019

100

Investors keen on participating in the Perak’s industrial market for 2022 may sample locations in Tasek Industrial Park, Menglembu Industrial area, Pengkalan Industrial Estate, Kamunting Raya Industrial area, Lumut Port Industrial Park, Gepong Industrial area and Tg. Malim Industrial Estate.

400

In terms of space utilisation, although there has been innovative usage for courier services, central kitchens etc, such trendy adoptions have not translated to significant uptake of industrial properties in Perak. Most are still used for conventional purposes like manufacturing, storage and distribution.

2019

Kinta area stood out as it has the most industrial transactions. Popular among the buyers were vacant industrial plots, detached units followed by semidetached factory/warehouses. A notable industrial transaction that took place in 2021 was a land sold by Ageson Bhd to ZheJiang GuoRong Digital Economy Group for RM278 million.

500

Perak had seen an improvement in the volume (up 13%) and much greater growth in value (up 92%) of industrial transactions from Q1 to Q3 2020 against the same period in 2021. Popular transactional value was in the range of RM500,001 to RM1 million and above RM1 million.

Volume & Value of Industrial Transactions in Perak (Jan-Sep 2019 to 2021)

400,001 500,000

500,001 1,000,000

1,000,001 & Above Source: NAPIC

Moving forward, performance of Perak’s industrial sub-sector in 2022 is looking to be encouraging in light of the government’s focus to draw foreign direct investments into the state for advancing its industrial capacity consistent with the Fourth Industrial Revolution experienced worldwide.

HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

KLANG VALLEY – ENDURANCE RACE IN 2022 The sights and sounds of traffic crawls and vehicles plying the city’s thoroughfares have returned from its exodus in 2020. These are commonplace in a metropolis but was once deserted in 2020 due to Covid-19. Today, with a vaccination rate inching above 79% in the country and booster shots made available to every eligible citizen, the city is as alive as it once was except probably for the microeconomic numbers to support it and disrupted too by the rising inflation. Welcome to 2022, a time when city dwellers in Klang Valley are well acquainted with all the SOPs rolled out by the government but at some point since 2020, fatigue set in and many have become immune to the statistics instead of the virus. But that is to be expected seeing the sometimes-questionable handling of the pandemic which raised more questions than answers. But in coming back to the main subject here, the most active property market of the country, Kuala Lumpur and Selangor, have weathered through the meltdown resiliently. For the first nine months of 2021, Kuala Lumpur registered a 10.5% rise in the volume of overall property transactions and an even higher increase of 53.2% in the value of the transactions, compared to the same period the year before. Selangor also experienced a similar trend, with the volume of overall transactions going up by 10.5% and the value of the transactions recording a 21.2% increase. Combined, the volume and value of overall transactions for Kuala Lumpur and Selangor went up from 47,145 units worth RM35 billion in the first nine months of 2020 to 52,096 units with a value of RM45.5 billion over the same period in 2021. The astounding revival seems surreal but if statistics by JPPH are proven to be accurate, certain sub-sectors of the Klang Valley’s property market might have just bottomed out in 2021 and looking to trudge back to its glorious days before the next foreseeable interruption on the cards – the 15th General Elections.

Residential - Overview 2021 Residential - Factors to Watch in 2022 • The improving trade statistics and employment figures will help boost investor and consumer confidence. • The Home Ownership Campaign (HOC) 2020/21 has helped to generate demand for residential properties but since there is no announcement for an extension into 2022 by the government, buying interest may reduce in intensity in 2022. • Developers will be making more extensive use of proptech apps to develop a better understanding of their buyer’s profiles and preferences as well as develop a closer rapport with the buyers. Developers have also increasingly turned to online marketing programmes to reach out to both domestic as well as overseas markets. • The profile of buyers is now younger and they are in their 20’s and 30’s. • AirBnB activities have been curtailed by travel restrictions due to Covid-19 and this has lessened the attractiveness of residential properties targeted at short term renters. • The residential market’s focus in 2022 will continue to be on: a. landed homes; b. affordable homes priced around and under RM500,000; c. smaller sized units; and d. niche high-end projects in good locations. • The primary market is faring better than the secondary market because of the incentives given by developers and the government under the HOC but this may change now that the HOC has ended. • Some banks are now refocusing on the secondary market because borrowers are perceived to be financially more well off and less likely to default. Moreover, there have not been many higher priced homes launched over the past two years and buyers who are interested in such homes will have to look for them in the secondary market. • The undertaking of mega infrastructure projects will benefit areas in the vicinity of these projects and provide a strong

motivation to invest in homes in these areas. • There is a strong possibility that the 15th General Elections may be held in 2022 even though the last date for holding the elections is on or before July 2023 and the uncertainty which will pervade the investment climate in the period before and immediately after the elections may cause house buyers to hold back on their home purchases. • There was a lack of substantial measures announced in Budget 2022 to boost the residential property market. Residential - Bright Spots for 2022 • The reopening of all sectors of the economy except the night entertainment business will lead to a recovery of the economy and boost investor and consumer confidence. This will ultimately benefit the residential property market. • Bank Negara is not expected to raise interest rates substantially and buyers will continue to take advantage of the current low interest rates to buy their dream homes. Nevertheless, some economists have projected a rise in interest rates by BNM in 2022 and may have some impact on the demand for property, depending on how much is the increase in the interest rates. • The government will extend the Vaccinated Travel Lane (VTL) arrangements with more countries and this will increase the inflow of foreigners, both tourists as well as investors, into the country. Foreign property buyers may return once international borders are lifted but the increase in numbers is not expected to be significant due to travel restrictions and concerns about the emergence of new variants of the Covid-19 virus as well as the stricter rules for new MM2H (Malaysia My 2nd Home) applicants. • The removal of RPGT (Real Property Gains Tax) for property disposals after the fifth year may lead to the vendors reinvesting their sales proceeds in the market and thus provide a boost to the market. HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

After the poor performance of the pandemic hit 2020, the residential market showed signs of a recovery in the first nine months of 2021 as the volume of residential transactions in the country inched up by 2.6% compared to the same period in 2020 whilst the value of transactions went up by a higher margin at 16%. This comes on the back of a 14% decline in the corresponding period of 2019 to 2021. Consistent with the country’s performance, both Kuala Lumpur and Selangor also recorded better numbers in volume and value of transactions. For Kuala Lumpur, the volume of transactions increased by 10% whereas for Selangor, it went up by 11.5%. Value wise, Kuala Lumpur recorded a jump of 21.4% to RM6.86 billion from RM5.65 billion. Selangor on the other hand increased by 11.6% to RM18.02 billion from almost RM14.70 billion. Home sales continued to be affected by the various phases of lockdowns in 2021 especially during MCO 3.0 (3 to 31 May 2021) and continued by the FMCO (Full MCO; from 1 June 2021). Developers however reported better sales take-up rates when movement restrictions were gradually eased after the strict lockdown of the FMCO in the first two weeks which was subsequently replaced by the 4-phase National Recovery Plan (NRP) beginning 15 June 2021. Based on our research, the number of new residential property launches in the Klang Valley for the first nine months of 2021 increased to 35 projects, which is five times more than the same period in 2020. Selangor with 28 new launches was ahead of Kuala Lumpur with only 7. Nevertheless, the number of units launched was less than that of 2020, indicating that developers were more cautious and preferred instead to launch smaller projects or staggered their launches into several smaller phases to ensure a speedier sales take-up. In terms of property type, landed terrace/link houses dominated the new launches. Sales performance from the new launches in 1H 2021 as reported by NAPIC was 24.7%, an improvement from the 12.9% recorded in 1H 2020 and the 17.0% in 2H 2020. Selangor recorded the highest number of new launches, capturing nearly 24.7% (4,114 units) of the national total with sales

HB Perspective 2022

Volume of Property Transactions (Jan-Sep of 2019, 2020 & 2021) Overall Volume of Transactions (units) 2019

2020

2021

Malaysia

243,250

204,708

201,068

Kuala Lumpur

11,490

9,416

10,407

Selangor

47,800

37,729

41,389 Source: NAPIC

Value of Property Transactions (Jan-Sep of 2019, 2020 & 2021) Overall Value of Transactions (RM, Million) 2019

2020

2021

Malaysia

103,147.46

80,713.24

91,992.58

Kuala Lumpur

12,709.25

9,470.80

14,510.43

Selangor

32,775.77

25,533.50

30,950.96 Source: NAPIC

Volume of Residential Property Transactions (Jan-Sep of 2019, 2020 & 2021) Overall Volume of Transactions (units) Malaysia

2019

2020

2021

153,078

131,154

134,637

Kuala Lumpur

8,204

7,252

7,981

Selangor

36,966

29,939

33,392 Source: NAPIC

Value of Residential Property Transactions (Jan-Sep of 2019, 2020 & 2021) Overall Value of Transactions (RM, Million) 2019

2020

2021

Malaysia

52,777.72

44,986.27

52,333.06

Kuala Lumpur

6,292.75

5,652.26

6,862.77

Selangor

17,814.86

14,699.08

18,022.35 Source: NAPIC

Residential Transactions Volume Trend (H1 2017 - H1 2021) 100k 94,992

94,200

99,931 22.2

80k

15 6.1

60k 40k

75,320

-0.8

10 92,017

-7

5 0 -5 -10 -15

20k

-20

-24.6

H1 2017

Volume (Units)

H1 2018

H1 2019

% Change

H1 2020

H1 2021

-25

Source: NAPIC

KLANG VALLEY OUTLOOK 2022

The HPI continued to decline in Q3 2021, easing 0.7% y-o-y and 1.9% from the previous quarter. All house types also recorded declines for Q3 2021 with terrace houses coming down by 1.0%, semi-detached by 3.6%, detached by 2.5% and high-rise by 2.9%.

30 25

0.4

34.51

-3.6

10 -26.1

5 0

H1 2017

H1 2018

H1 2019

H1 2020

H1 2021

% Change

Value (RM Millions)

Source: NAPIC

Index Point

Y-o-Y

Index Q3 2010 Index Point Average Price

198.6

0.7 1.9

1.0

0.2 0.2

2.2

6 2.7

6.5 2.0

2.6

2.8

6.9

199.5

4.0

195.0

195.3

190.1

178.5

167.1

156.3

1.1

2.3

8.8

126.8

112.0

100

143.6

9.8

150

2.4

13.2

200

13.2

Malaysian House Price Index Q3 2010 to Q3 2021

Q-o-Q Index Q3 2021P

102.0 RM220,154

Index Point

198.6

Average Price

RM428,458 Source: NAPIC

Kuala Lumpur & Selangor PBOs Total Supply & Occupancy Rates (as at Q3 2021) No. of Buildings

Total Space (Mil sqm)

% Occupancy

KL - City Centre

306

7.488

71.3

KL - Outside City Centre

107

1.903

67.5

Total

413

9.391

70.5

Selangor

237

4.075

66.9

Residential Outlook 2022 The residential market showed an improvement in 1H 2021 but was then affected by the lockdown imposed during the FMCO in the first half of Q3. On the whole, after witnessing some resilience and returning of interest in the market post-lockdown, Klang Valley’s residential property market is expected to record a flattish to slight improvement for the whole of 2021.

25.61

9.5

35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30

34.7

31.66

2.6

In terms of price movement, the House Price Index (HPI) released by NAPIC for Q2 2021 showed that Kuala Lumpur recorded the highest decline of 5.2% compared to the national average of -1.2% with Selangor sliding only marginally by 1.6%. This pushed Kuala Lumpur’s average all house price down to RM744,965 from RM785,457 over the same period with Selangor’s dropping to RM482,018 from RM489,811.

34.66

32.85

6.7

In terms of overhang properties, Malaysia’s nationwide total went up to 31,112 units valued at RM20.1 billion as at Q2 2021 before easing to 30,358 units worth RM19.80 billion in Q3 2021. The 754 units or 2.42% reduction in a span of a quarter was boosted by the HOC where the value of the overhang properties also came down by 1.49%. Kuala Lumpur and Selangor had the third and fourth highest number of overhang residential properties with 3,863 and 3,376 units respectively while Johor kept its lead with 6,509 units.

102.0

A random survey carried out by us on 13 new residential projects launched in 2020/2021 in the Klang Valley revealed that 9 of these projects have achieved sales of 70% and above, signaling that buying interest was still present and that the Home Ownership Campaign (HOC) 2020-2021 has been quite effective in helping developers push sales.

Residential Transactions Value Trend (H1 2017 - H1 2021)

1.6

performance at 26.2%. Kuala Lumpur trailed closely with the second highest number of new launches at 21.9% (3,651 units) but with a significantly lower sales performance of only 3.5%.

Location

Source: NAPIC

HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

Aside from the market performance, borrowers continue to face problems securing maximum loan margins from banks due to the stricter processing criteria that has been adopted by the financial institutions for some time while interest from foreign investors is also not expected to return in a big way as some travel restrictions will still be in place even after international borders are reopened. Moreover, the latest rules for new applicants under the Malaysia My 2nd Home programme (MM2H) have made it less attractive for foreigners to apply for visas under the pseudo-migration or residency scheme and this will lead to a decline in interest and ultimately reduce the number of residential properties sold to foreigners.

Purpose-Built Offices Overview The supply of privately owned purpose-built offices (PBOs) in Kuala Lumpur went up marginally by 1.25% from 9.275 million sq metres in 2H 2020 to 9.391 million sq metres in Q3 2021 whereas the supply of PBOs in Selangor stood at 4.075 million sq metres. In Kuala Lumpur, four buildings were completed in the second half of 2021 which contributed 416,000 sq metres of nett lettable floor space to the supply of office space in the capital. There were also another 16 buildings under various stages of construction with 1 million sq metres due for completion over the next few years. In Selangor, one building with a net lettable area of 46,000 sq metres of space was completed in 2H 2021 whilst its incoming supply will add another 412,000 sq metres of space over the next few years. In addition, there are a number of proposed office developments that have been announced which, if the developers proceed with the construction, will add significantly to the future supply in Kuala Lumpur. Some of these also involve the redevelopment of existing buildings but in view of the slowdown in the economy and the consequential tapered demand for office space due to the impact of the Covid-19 pandemic

HB Perspective 2022

Kuala Lumpur & Selangor Office Space Incoming Supply (as at Q3 2021) Status / Location

No. of Buildings

Total Space (Mil sq m)

0.580

KL - Completion City Centre Outside City Centre

Total

0.580

City Centre

0.822

Outside City Centre

0.144

0.966

Selangor – Completion

0.046

Selangor – Incoming Supply

0.412

Total

0.458

KL - Incoming Supply

Total

Source: NAPIC

Kuala Lumpur & Selangor New Office Buildings Completed in 2021 Building

NLA (sq m)

Kuala Lumpur Menara Affin, TRX

76,600

Plaza Conlay Tower 1, Jalan Conlay

56,300

Menara IQ (HSBC), TRX

52,700

The Stride, BBCC (strata offices)

38,900

TS Law Tower, Jalan Tun Razak

33,600

Permata Sapura, Jalan Kia Peng

11,600

Menara Great Eastern 2

20,000

Menara UOB 2

17,200

Selangor Menara Imazium, Damansara Uptown

46,000

Menara HCK, Empire Damansara

41,200

Quill 9 Annexe, Jalan Professor Khoo Kay Kim

9.600 Source: Henry Butcher Research

KLANG VALLEY OUTLOOK 2022

Kuala Lumpur & Petaling Jaya (Selangor) New Office Buildings Completion 2022 Onwards

including the glaring oversupply, some of these projects may not be launched in the immediate future. They are: • Lot 185 KLCC – 500,000 sq ft of retail & office space & a hotel • Bukit Bintang City Centre (BBCC) Signature Tower by Eco World Development Group Bhd • Former Brickfields District Police Headquarters and Barracks – Seni Nadi Land Sdn Bhd • Tradewinds Square, Jalan Sultan Ismail (redevelopment of Kompleks Antarabangsa & Crowne Plaza Hotel) – proposed 110-storey corporate tower, 61-storey mixed use tower and a retail mall • Tradewinds Towers – 50- and 26-storey office towers to be built on the former Menara Tun Razak site, Jalan Raja Laut • New 60-storey office tower to be added to Menara Dayabumi • Bandar Malaysia

Location

NLA (sq m)

Estimated completion

Merdeka 118

Changkat Stadium

157,900

2022

Pavilion Damansara

Damansara Heights

139,000

2022

Dutamas

55,700

2022

Jalan Semarak

104,000

N.A.

Building Kuala Lumpur

The MET Corporate Tower Menara Felcra Total

456,600

Petaling Jaya (Selangor) Paramount Tower 1 & 2

Jalan Universiti PJ

53,000

2022

One City Phase 3

USJ

139,000

2026

PJ Sentral - PKNS

Section 52, Petaling Jaya

80,000

TBA

Petaling Tin redevelopment

28,000

TBA

PJCC

27,000

TBA

Section 13 PJ

22,000

TBA

Fraser Square

As of Q3 2021, Kuala Lumpur’s PBOs’ occupancy declined to 70.58% from 77.6% the year before with those located outside the city centre spotting a lower occupancy of 67.5% compared to those within the city centre at 71.3%. Occupancy in Selangor was even lower at 66.9% down from 69.2% over the same period. The consistent decline is a reflection of the gloomy business climate in Klang Valley with continuous reports of closures and downsizing making its round on both the mainstream and social media. In line with that, the work from home (WFH) arrangement has also transformed the requirement for space in the office where instead of prioritising headcount attendance for maximum productivity, it is now led by adherence to the SOPs. This in itself may have rejigged the entire workforce and space requirement model to make way

Total

349,000

Grand Total

805,600 Source: Henry Butcher Research

for better efficiency and profitability without compromising on health and safety. It is also worth noting that the occupancy levels recorded in Kuala Lumpur has been the lowest since 2005 with most years registering above 80% except only in 2012, 2013, 2016, 2018 and 2019 dipping below that.

rental rates in the coming years unless demand has a reason to increase substantially. But if not and in view of the current oversupply coupled with the impending release in the future, it should not surprise if some developers decide to defer their projects to avoid worsening the situation and risk the steep climb to fill up the vacant lots.

In looking at the substantial incoming supply of office space over the next few years, it is expected to result in an increase in vacancy rates when these new buildings are completed. This will undoubtedly add more pressure on the landlords to reduce

In terms of rental rates, NAPIC’s report for the first half of 2021 showed a marginal decline of 0.1% in 1H 2021 in the rental index for Klang Valley’s PBOs although there was concern over the drop in occupancy. The projected

Purpose-Built Office Rental Index in Klang Valley, Johor Bahru & George Town (Q1 & Q2 2015 vs Q1 & Q2 2021) Q1 2015

Q2 2015

Q1 2021

Q2 2021

Index

Average Rental (RM, psm)

Index

Average Rental (RM, psm)

Index

Average Rental (RM, psm)

Index

Average Rental (RM, psm)

Klang Valley

116.20

43.12

116.90

43.38

130.80

48.54

130.80

48.53

Johor Bahru

116.60

30.65

117.10

30.78

129.50

34.05

129.70

34.10

George Town

110.90

27.22

110.90

27.22

127.30

31.25

126.90

31.14

HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

massive increase in the supply of office space over the next few years may as such assert downward pressure on occupancy rates and impact rental rates going forward. With the market going into a phase of uncertainty in 2020 due to Covid-19, the year 2021 was not as buoyant in terms of office building transactions in Kuala Lumpur. Only two major transactions were observed involving Media Prima Bhd and Hap Seng Consolidated Bhd with the Employees Provident Fund (or KWSP) having put up several office buildings which it owns for sale but yet to be concluded, namely Bangunan KWSP on Jalan Raja Laut and Bangunan KWSP Changkat Raja Chulan both in Kuala Lumpur, and Bangunan KWSP Damansara Fairway in Petaling Jaya, Selangor. The Paramount Group has also announced its intention to sell the two office buildings that it is building in Section 13 of Petaling Jaya in Selangor. The proposed sale of an 8-storey office building at Star Sentral in Cyberjaya by Awanbiru Technology Bhd to Serba Dinamik Group Bhd was however not completed and the deposit was forfeited.

Purpose-Built Office Rental Trend in Klang Valley, Johor Bahru & George Town (Q1 2015 to Q2 2021) 6 5 4 3 2 1 0 -1 -2

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2015

2016 Klang Valley

2017

2018

Johor Bahru

2019

2020

2021

George Town Source: NAPIC

Overall Range of Office Rentals Location

Rental Range (RM psm / mth) Q3 2021

2020

Grade A+

91.50 – 150.70

96.90 – 150.20

Grade A

75.30 – 94.70

75.30 – 102.30

Grade B

53.80 – 70.00

43.00 – 70.00

KLCC / GT

CBD

Office Outlook 2022

Grade A

59.20 – 70.00

59.20 – 75.30

The resumption of lockdowns under various phases of the MCO in 2021 has continued to impact the office subsector with businesses yet to recover fully from the slowdown suffered during the pandemic. Without any significant increase in demand for office space, occupancy rates of office buildings are expected to decline especially with the increase in supply resulting from the completion of several new buildings over the next few years.

Grade B

37.70 – 48.40

WCC

59.20 – 96.90

37.70 – 96.90

Suburbs

43.00 – 75.30

The successful ramping up of the National Covid-19 Immunisation Programme has managed to gradually lower down the infection rates and this has influenced the government’s Budget 2022 and the 12th Malaysia Plan by incorporating measures that can boost economic growth after the pandemic and consequently raise business volumes that will lead to a recovery in the demand for office space in the future.

HB Perspective 2022

43.00 – 75.40 Source: HBM Research/NAPIC

The recent emergence of Omicron has however caused governments throughout the world to exercise more caution and pull the handbrakes on unfettered international travel. The ability of the Malaysian government to prevent the spread of this and other new variants which could emerge in the future will be key to determine if the governmental leaders will be able to achieve a sustained economic recovery for the country. Meanwhile, the office market is expected to face twin headwinds of a stagnant demand for office space and an increasing supply going into 2022. The political uncertainty emanating from the 15th General Elections which

must be held on or before July 2023 will continue to cause investors and businesses to be more cautious. The hope of a more stable political situation which supports sustained economic recovery will only come about after the dust has settled post-elections and a government with a strong mandate has been formed. It is only after these important milestones are achieved will the country be able to see its economy standing on a stronger footing and be ready for future growth which in turn will fuel demand for office space and help the office sub-sector recover.

KLANG VALLEY OUTLOOK 2022

Retail

Rentals of Selected Grade A Purpose-Built Office Buildings Building

Location

Rental (RM psm)

Binjai Tower

KLCC

80.70 – 94.70

Citibank Tower

KLCC

129.10 – 140.00

Petronas Twin Tower (Tower 2)

KLCC

129.10 – 150.70

Petronas Tower 3

KLCC

129.10 – 140.00

Menara AIA (formerly Standard Chartered Tower)

Bukit Bintang

70.00 – 86.10

Pavilion Office Tower

Bukit Bintang

75.30 – 86.10

Public Bank Tower 2

Bukit Bintang

53.80 – 70.00

Jalan Munshi Abdullah

59.20 – 64.60

Jalan Ampang

59.20 – 64.60

KLCC / GT

KL CBD Area Capsquare Office Tower 2 Menara AIA Menara Olympia

Jalan Raja Chulan

48.40 – 64.60

Jalan Munshi Abdullah

53.80

Jalan Melaka

53.80 – 70.00

Menara CIMB

KL Sentral

80.70 – 86.10

Menara Kembar Bank Rakyat

Brickfields

59.20

Menara Multi-Purpose Wisma Lee Rubber WCC Area, KL

Menara Shell

KL Sentral

80.70 – 96.90

Setia Tower @ KL Eco City

Jalan Bangsar

64.60 – 80.70

Southpoint Tower

Mid Valley City

75.30 – 86.10 Source: Henry Butcher Research

Major Tenant Movements Building

Location

Floor Area (sq m)

Tenant

Nestle

6.500

Relocation

1 Powerhouse

L'Oreal

2,300

Relocation

Exchange 106

Spaces (Regus)

2,800

New Lease

Mercu 2

FedEx

1,400

New Lease

Mercu 2

Robert Walters

6,900

New Lease

Grass Valley

1,800

Relocation

Menara TCM

Embassy Papua New Guinea

610

New Lease

Menara TCM

Siemens

610

New Lease

Yonex

370

New Lease

DAR Energy

2,800

1 Powerhouse

Menara BT

Symphony Square The ICON

New Lease Source: Henry Butcher Research

Major Office Transactions in 2021 Building, Location

Date

Built-Up

Price (RM)

Buyer

Balai Berita, Bangsar

July

327,310

156.4mil (5,100 psm)

Media Prima Bhd

Wisma KFC, Jalan Sultan Ismail

Dec

175,292

190mil (11,700 psm)

Hap Seng Consolidated Bhd

At the conclusion of the year in December 2021, Klang Valley (ie. Kuala Lumpur, Selangor and Putrajaya) had 286 shopping centres with more than 7.7 million sq metres of retail space. Adding to these were two new shopping centres and one mall extension which opened in 2021, contributing a total nett floor area of more than 215,000 sq metres. In 2022, at least 7 more new shopping centres and 1 mall extension are expected to open across Klang Valley with a total nett floor area exceeding 430,000 sq metres and this includes IOI City Mall’s Phase 2 and The Exchange TRX contributing more than 92,000 sq metres and exceeding 120,000 sq metres of nett lettable area respectively. On the whole, the average occupancy rate of shopping centres in the Klang Valley declined from 73.5% in 2020 to 72.3% in 2021. The drop in Kuala Lumpur was from 75.9% in 2020 to 74.6% in 2021 and in Selangor from 71.0% in 2020 to 69.7% in 2021. Consistent with the previous year, the decline is attributed mainly to the impact of the Covid-19 pandemic and also the emergence of the Covid-19 Delta variant. Despite the pandemic, the average occupancy rate of shopping centres in Putrajaya maintained at 83.6% in 2021. Klang Valley’s average rental rate on the other hand dropped marginally from RM108.71 psm per month in 2020 to RM108.60 psm per month in 2021. This average however does not take into account the rental rates of anchor tenants such as the supermarkets, department stores, cineplexes, bowling alleys etc, or the rental waivers and rental discounts given to anchor as well as selected tenants. The decline in the average rental rates for 2021 also did not factor in rebates extended by many shopping centre owners to the retailers across the various stages of the lockdowns. Rental rebates and rental reduction were in fact offered by the owners in order to retain existing tenants so a win-win situation can be achieved for both parties. However, only the financially more viable tenants were able to accept the restructured rental package.

Source: Henry Butcher Research

HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

Retail Supply & Demand in Klang Valley 2021 Through the two major lockdowns of the MCO 2.0 and MCO 3.0 (including parts of the initial two weeks of the National Recovery Plan) in 2021, a majority of the retail trade were ordered to close and just like in 2020, Malaysian retailers turned to online shopping platforms and deliveries to stay alive. This repeat occurrence saw online shopping becoming a major channel of distribution of retail goods and services. But shopping habits changed again when retail stores were allowed to reopen and F&B outlets permitted to have dine-in guests. The loosening of these restrictions affected online purchases significantly as most Klang Valley residents preferred going back to their favourite physical outlets instead of continuing their purchases online. But despite the major lockdowns, several retail and services trades in Klang Valley have actually thrived in 2021, they are: • Small-format grocery-related shops such as the mini-markets, snacks’ specialty stores, food specialty stores and ready-to-eat convenience stores that were also small-sized grocery stores in itself enjoyed better sales during the lockdown and were able to compete directly with the supermarkets and hypermarkets. • Fixed-price and second-hand stores became popular in 2021 due to their very affordable retail goods. • Courier service providers expanded aggressively during the last two years to capitalise on the high demand for delivery goods eg. POSstore had the most outlets with more than 700 in Malaysia. • In spite of the many closures during the Covid-19 pandemic, Malaysian individuals and companies were still investing in new F&B outlets such as cafes, restaurants, food stalls, food kiosks and food trucks. • The popularity of food delivery during the pandemic gave birth to cloud kitchens in the Klang Valley. Operators included Foodpanda, Grab Kitchen, My Ghost Kitchen, Cookhouse, Cloud Hawker, Kloud Kitchen, Kitchen Connect, Delivery Ghost Kitchen, Foodle, COOX, TapasTapas Cloud Kitchen, Go Virtual Kitchen, KitchenCo, kEATchen, Makan Factory, Foodlab etc.

Location

No. of Malls

Total Nett Floor Area (sq m)

Average Rental Rate (RM psm pm)*

Average Occupancy Rate (%)

Kuala Lumpur

121

3,490,782

125.40

74.6

Selangor

161

4,030,919

105.15

69.7

Putrajaya

215,349

81.48

83.6

286

7,737,050

108.60

72.3

Total

Notes: # Include hypermarket malls and arcades. * Exclude rental rates of anchor tenants such as supermarket, department store, cineplex, bowling alley etc. Source: Henry Butcher Retail

New Shopping Centres in Klang Valley Name

Location

Nett Floor Area (sq m)

1. Setia City Mall Phase 21

Setia Alam

41,806

2. Permata Sapura Tower

KLCC

6,503

Bukit Jalil

167,225

Opened in 2021 2

3. Pavilion Bukit Jalil

Total

215,534

Opened in 2022 4. 8 Conlay4

KLCC

12,077

Setiawangsa

29,636

Semenyih

15,794

7. IOI City Mall Phase 2

Putrajaya

92,903

8. KSL Esplanade Mall8

Klang

65,032

Bukit Bintang

79,989

Bukit Kiara

21,460

5. Datum Mall5 6. Ecohill Walk Mall

6 7

9. Mitsui Shopping Park Lalaport

10. Senada Shopping Centre 11. The Exchange TRX

Total

Jalan Tun Razak

120,774 437,665

1. The new wing was added to its existing shopping mall and opened in March 2021. Lulu hypermarket is its anchor tenant. As at December 2021, many retail shops were still in the process of opening. 2. The 52-storey office development has 2 levels of retail space. As at 30 November 2021, retail shops had yet to be opened to the public. 3. Opened on 5 December 2021, anchor tenants which have opened included Parkson, HOHM, The Food Merchant. Eight Avenue, Mr DIY, Toys“R”Us and Harvey Norman. Upcoming anchor tenants include Dadi Cinema, Food Republic, Discover Siam by Siam Piwat, an ice-skating ring and a 4,366sqm exhibition hall. 4. Part of a mixed-use development with 2 residential towers to be managed by Kempinski Hotel including a tower block consisting of hotel and service suites, the Lifestyle Retail Quarters is a 9-storey boutique mall to be occupied by retail shops and F&B outlets. 5. Completed in Q2 2021 but yet to open to the public, confirmed anchor tenants include Pacific Marketplace, Pacific Concept Store and Pak Tam wedding hall. 6. Completed in 2021 but yet to open to the public, Lulu Grocer is the anchor tenant. 7. Slated to open to the public by Q2 2022, it is expected to offer a wide selection of retail shops and F&B outlets, a canopy-covered outdoor street retail promenade, a 3,716sqm exhibition hall, a cineplex with IMAX hall, edutainment & entertainment centres, a rooftop sports centre with gym. Confirmed anchor tenants include AEON, GSC, Best Denki, Food Empire, Maju Home and Proton. 8. Located in southern Klang, confirmed anchor tenants include AEON MaxValu Prime, TGV, EnergeXPark, Mr. DIY and Ashley Furniture. 9. Targeted to open on 20 January 2022, it will offer over 300 retail shops and F&B outlets, ZEPP Kuala Lumpur, a 9,290sqm Malaysian Grand Bazaar, a concert hall and entertainment hub with 2,500 seats equipped by Sony Music Entertainment. Jaya Grocer is its grocery anchor. 10. The 3-storey shopping centre is part of Senada Residence that includes 2 residential towers and an office block. 11. Anchor tenants include Seibu department store, an upscale supermarket by Dairy Farm International Holdings and a new cinema concept by GSC. Source: Henry Butcher Retail

HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

Rental Rates of Selected Shopping Centres in Klang Valley 2021 Shopping Centre

Rental Rate (RM psm per month) Lower Ground

Ground Floor

1st Floor

2nd Floor

3rd Floor

4th Floor

3 Damansara

118.00 – 269.00

107.00 – 150.00

75.00 – 129.00

86.00 – 107.00

Cheras Leisure Mall

183.00 – 344.00

140.00 – 237.00

107.00 – 301.00

86.00 – 226.00

Low Yat Plaza

301.00 – 323.00

205.00 – 517.00

248.00 – 355.00

107.00 – 333.00

150.00 – 430.00

118.00 – 247.00

Mid Valley Megamall

269.00 – 388.00

484.00 – 861.00

355.00 – 409.00

247.00 – 269.00

161.00 – 226.00

SACC Mall

22.00 – 75.00

48.00 – 150.00

48.00 – 129.00

28.00 – 75.00

27.00 – 48.00

Suria KLCC

495.00 – 2,303.00

452.00 – 1,012.00

452.00 – 1,033.00

398.00 – 904.00

527.00 – 1.022.00

484.00 – 68.00

The Mines

75.00 – 194.00

86.00 – 194.00

54.00 – 161.00

97.00 – 205.00

Notes: NA -not applicable

Retail Outlook 2022 Shopping traffic returned to all major shopping malls across the country since November 2021 and in Klang Valley, they are packed with shoppers and diners on the weekends where even long traffic crawl in the car parks is spotted again, reminisce of the pre-pandemic days and certainly shows that the normal shopping behaviour and pattern have returned among the city folks. Thus far, almost all retail trades have been allowed to open for business with the exception of only the night entertainment outlets. Looking back, retail businesses that used to depend on tourists have been receiving good response since midOctober 2021 when the interstate travel ban was lifted with shopping centres in Kuala Lumpur city centre, Petaling Jaya, Damansara and Bandar Sunway welcoming fellow Malaysians from other states in large numbers. As such, Klang Valley’s shopping traffic is expected to continue growing until February 2022 courtesy of Christmas on 25 December 2021 and Chinese New Year on 1 February 2022. The new Covid-19 variant known as Omicron and any other potentially more dangerous variant thereafter will however undermine the ability of Malaysian shopping centres to fully recover in 2022. The risks of another total lockdown in the near future continues to haunt Malaysian mall owners and its retail tenants. Although shoppers have made their way back to the malls, foreign tourists

Source: Property Market Report, NAPIC / Henry Butcher Retail

remain absent in Malaysia and this may take another six months before meaningful number of arrivals can be seen in the country. The troublesome entry requirements imposed on foreign arrivals are one of the factors hindering leisure tourists from coming and this shall negatively impact major shopping malls in Kuala Lumpur city centre, Petaling Jaya, Damansara, Sunway and Sepang which were among the favourites of foreign tourists in 2019. Moving forward, shopping centres slated for opening in the Klang Valley in 2022 are expected to face some headwinds primarily due to the Covid-19 pandemic and the current oversupply of retail space. This will see malls struggling to fill up the retail lots right from day one. In order to attract permanent tenants to open in their shopping centres, it would be imperative for retail landlords to lower their rental rates and/or offer longer rent-free periods. They may also need to seek temporary tenants to fill up the empty lots, especially at prime locations, as a stop gap measure to get things going or if not, for its cash flow consideration. The Covid-19 pandemic has undeniably forced retail landlords to pay more attention to greater digitisation of their businesses if they didn’t do so previously. This will compel more investments in digital infrastructure (including software, hardware and human) in the new normal for an omnichannel shopping experience allowing shoppers to buy goods and services in multiple formats with ease.

HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

Industrial - Factors to Watch in 2022 • Recovery of FDIs which saw an improvement in the first nine months of 2021 should lead to an increase in demand for more industrial space. • The ability of manufacturers to scale up production on the back of a relaxation in SOPs. • Restrictions imposed by the government on the import of foreign labour will affect manufacturers’ ability to expand production. • Implementation of the 12th Malaysia Plan and the projects under the National Investment Aspirations as well as the Fourth Industrial Revolution (IR4.0) will be positive for the industrial property sector. • The continued good trade performance recorded by the country in 2021 will benefit the manufacturing industry which will in turn benefit the industrial property sector. • Implementation of the Smart Selangor Action Plan to 2025 (SSAP 2025) which will focus on the following key areas will provide a boost to the manufacturing and services sectors: - digitalisation of industries: services, manufacturing or agriculture with a focus on SMEs. - creation of ecosystems to enable industries to compete better and scale up using digital technologies. - development of next generation industries of strategic interest to the state. • The various strategies that will be adopted by Selangor in its quest to become a global business hub via the Selangor International Business Summit (SIBS) 2021 which was held from 18 to 21 November 2021 will also benefit the industrial sector.

Industrial A rebound was seen in the industrial property sub-sector in the Klang Valley in the first nine months of 2021 compared to the same period in 2020. The volume and value of industrial property transactions in Selangor went up in 2021, rising 18% and 13% respectively compared to the corresponding period in 2019. In Kuala Lumpur, although the volume and value of industrial properties are only a fraction of the size of neighbour Selangor, it also experienced a 16% upward movement in volume of transactions and up 67% in value of transactions between the first nine months of 2020 and the same period in 2021. The positive trajectory comes on the back of a significant drop in the same period the year before with Selangor’s and Kuala Lumpur’s volume of transactions eroding by 32% and 45% respectively while in terms of value of transactions, the slide was marginal for Selangor at 0.33% but larger in Kuala Lumpur at 49%. As such, based on the positive rise of the first nine months of 2021 alone, the market appeared to be on a recovering trend with Selangor’s value of transactions steaming ahead by exceeding the RM5.2 billion recorded in the same period in 2019.

Some of the more notable deals concluded in the industrial sub-sector in 2021 are: • Axis REITs’ purchase of Melewar Steel Services Sdn Bhd in Shah Alam (Section 15) for RM11 million and FIW Steel in Taman Perindustrian Bukit Raja, Shah Alam, for RM120 million. • LOGOS SE Asia joint venture with Global Vision Logistics to develop sustainable integrated logistics, warehousing and e-commerce hub on three parcels of land collectively measuring approximately 71 acres in Section 16, Shah Alam. • LOGOS joint venture with Sime Darby to develop a 177 acres site in Bandar Bukit Raja for a build-to-suit for lease or sale model. The e-commerce sector continued to do well and contributed to the strong demand for logistics, warehousing and sorting & distribution facilities as well as data centres. With the reopening of the economy, most manufacturing businesses were able to restart and proceed with their normal operations in the second half of 2021. Demand for industrial properties in the near term will remain stable especially for companies who require specific industrial properties to suit their business needs.

Volume of Industrial Property Transactions (Jan-Sep of 2019, 2020 & 2021) Volume of Industrial Transactions (Units) Malaysia Kuala Lumpur Selangor

2019

2020

2021

4,704

3,303

3,838

110

1,667

1,124

1,325 Source: NAPIC

Value of Industrial Property Transactions (Jan-Sep of 2019, 2020 & 2021) Value of Industrial Transactions (RM million) Malaysia Kuala Lumpur Selangor

2019

2020

2021

10,155.67

9,028.11

11,355.11

279.93

143.14

239.81

5,232.75

5,215.42

5,902.67 Source: NAPIC

HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

Major Industrial Land Transactions in 2021 Scheme

Location

Month

Size (sq ft)

Price (RM)

Klang

Jan

244,663

26.1 mil (107psf)

Kawasan Perindustrian Taman Ehsan

Kepong

Feb

39,303

19 mil; (483psf)

Batu 13/2

Cheras

Feb

114,851

27 mil (235psf)

Kota Kemuning Industrial Park

Shah Alam

Feb

43,562

13.8 mil (317psf)

Bukit Raja Prime Industrial Park

Klang

Mar

904,060

120 mil (133psf)

Taman Sentosa

Hulu Langat

Mar

239,820

25 mil (104psf)

Perusahaan Batu Caves

Batu Caves

Mar

87,238

18 mil (206psf)

Seksyen 51

Petaling Jaya

Mar

41,681

15 mil (360psf)

Seksyen 51

Petaling Jaya

Apr

63,338

20 mil (316psf)

Bukit Kemuning (factory only)

Shah Alam

Apr

181,048

18 mil (99psf)

Kota Kemuning Industrial Park

Shah Alam

Apr

52,334

17.94 mil (343psf)

Rawang

Apr

87,112

12 mil (138psf)

Klang

Apr

89,836

14 mil (156psf)

Elite Industrial Park

Shah Alam

May

124,036

27.3 mil (220psf)

Kota Kemuning Industrial Park

Shah Alam

May

42,512

11.5 mil (271psf)

Lion Industrial Park

Shah Alam

Jul

87,715

25 mil (285psf)

Kawasan Perusahaan Selat Klang Utara

Rawang Integrated Industrial Park Bukit Raja Prime Industrial Park

Source: JPPH / Henry Butcher Research

Industrial Outlook 2022 With the success achieved in the National Covid-19 Immunisation Programme, the government has refocussed their attention to boosting the economy to help businesses recover from the drastic impact of the pandemic. It goes without saying that a strong and sustained economic recovery would augur well for the industrial property market as demand will rise to support business expansion activities and with it, contribute to the country’s exports and GDP.

HB Perspective 2022

KLANG VALLEY OUTLOOK 2022

Hospitality The performance of the tourism industry continued to be constrained by the travel restrictions under MCO 3.0 and FMCO in 2021 with hotel occupancy greatly affected by it. According to the Malaysian Association of Hotels (MAH), hotel occupancy rates were projected to be in the low 20% in the first half of 2021 and worse off than 2020.

Average Occupancy Rates of Hotels in Kuala Lumpur, Putrajaya & Selangor (Jan–Jun 2019/20) 2019 (%)

2020 (%)

Decline (%)

Kuala Lumpur

State

56.5

27.8

-28.8

Putrajaya

61.4

42.6

-18.8

Selangor

53.1

29.2

-23.9

Malaysia

56.6

27.8

-28.8 Source: Tourism Malaysia

Statistics gathered from Tourism Malaysia also showed the sub-par performance where the average occupancy rates of hotels in Kuala Lumpur and Selangor for the first half of 2019 and 2020 dipped below 30% except Putrajaya and consistent with the national average of 27.8%. This trend is expected to continue into 2021 for Kuala Lumpur and Selangor.

2021

Hospitality Outlook 2022

2022 Onwards

The lifting of the interstate travel in October 2021 has led to an increase in domestic tourism and helped jumpstart the otherwise hibernating tourism market. With many locals still unable to travel outside the country and enticed by the attractive packages offered by hotels including the plethora of domestic tourist attractions, many took the opportunity to travel and holiday within the country especially in popular destinations like Penang and Langkawi. The success of the Langkawi Domestic Travel Bubble pilot project has established tried and tested SOPs which may, with some tweaks and improvements, be implemented for the rest of the country. The establishment of the VTL (Vaccinated Travel Lane) with Singapore in December 2021 and with other countries in early 2022 would also have helped bring back foreign tourists if not for the momentary suspension due to the new Covid-19 variant of Omicron. With KLIA being the main entry point into the country, the reinstatement of VTL should augur well for the hospitality industry in the Klang Valley. Under Budget 2022, the government has allocated a sum of RM1.6 billion to assist the tourism industry which has been badly affected by the pandemic and this will help the industry to recover to some extent. And although a total of 120 hotels nationwide were reported to have closed either permanently or temporarily in 2020/21, there were still a number of new hotels which opened in spite of the closures, including several hotels which are due for opening in 2022 and beyond.

HB Perspective 2022

New Hotels Due for Opening in Kuala Lumpur & Selangor Hotel

Location

No. of Rooms

Putrajaya

290

AMI Suites

Mont Kiara

115

Mercure Glenmarie

Glenmarie

230

Kempinski

8 Conlay

260 rooms, 300 suites

Fairmont

KLCC

690

Doubletree by Hilton

Conrad Kuala Lumpur

Jalan Sultan Ismail

544

Merdeka 118

232 incl. 28 suites & 30 residential apartments

Jalan Bukit Bintang

160

Bukit Nanas

180

Park Royal Collection KL

Jalan Sultan Ismail

535 rooms

Canopy by Hilton KL

BBCC, Jalan Bukit Bintang

456 rooms

Amari KL

KL Eco City

252

Jumeirah

Jalan Ampang near KLCC

190

SO/Sofitel

Jalan Ampang near KLCC

207

KLCC

350

KL Sentral

451

TRX

471

KL Midtown, Jalan Duta

450

Park Hyatt Kuala Lumpur JW Marriot extension Hotel Indigo

Edition JW Marriot Sentral Kimpton Hyatt Regency

NEGERI SEMBILAN OUTLOOK 2022

NEGERI SEMBILAN – MAKING A COMEBACK IN 2022 Factors to Watch in 2022 • The Seremban-KLIA corridor and Nilai are expected to experience increased activities and potential growth with prominent projects in the area eg. Malaysia Vision Valley 2.0 (MVV 2.0), Bandar Sri Sendayan, Bandar Ainsdale, S2 Heights, Putra Nilai and Nilai Utama. Bright Spots in 2022 • Malaysia Vision Valley 2.0 (MVV 2.0) is a mega project that will introduce new economic drivers as enablers for traditional sectors, promote economic growth and harness the concept of value creation to become a nation of producers (instead of as consumers) that is envisioned as a game changer to unlock the value of Negeri Sembilan. • The 42-lots first phase of Hamilton Industrial Park (part of MVV 2.0) was fully sold within months of launch, setting the tone for the market given its suitable price points of RM50 to RM55 per sq ft with land area ranging from about 1.3 to 9.1 acres located to the south of Nilai Industrial Estate. • The current 1.75% low overnight policy rate (OPR). Outlook for 2022 • Negeri Sembilan’s residential market is not expected to be as buoyant as 2021 after the expiry of the Home Ownership Campaign (HOC) 2020-2021 at the end of 2021. • The commercial sub-sector will likely perform better in 2022, barring any lockdowns or major catastrophes. • The industrial market in Negeri Sembilan is expected to do better in 2022 than 2021.

Negeri Sembilan’s property market registered a slight drop of 2.9% in volume of transactions in the first nine months of 2021 compared to the same period in 2020. Value of transactions however rose by 19.4%, bringing in a total of RM4 billion from RM3.4 billion in the corresponding period in 2020. This translates to an average transactions per quarter of around 3,464 units of properties compared to more than 4,000 units in the pre-Covid-19 years of 2018 and 2019 at 4,413 and 4,057 units respectively. Certain sub-sectors like the residential and industrial sub-sectors performed better in 2021 than the previous year. The residential market registered a 4.7% increase in the volume of transactions and an even higher growth of 18.3% in the value of transactions in the first nine months of 2021 compared to the corresponding period the year before. Some of the increase can be attributed to the more affordable houses being made available to the market and the attractive incentives offered via the Home Ownership Campaign (HOC) 2020-2021 while others could be due to the higher priced properties which raised the value of transactions higher. The improvement recorded by the industrial sub-sector in the state was even more impressive as the volume of industrial property transactions went up by 6.05% in the first nine months of 2021 whilst the value of the transactions shot up by 48.83%. One possible reason for the good performance of the industrial sector could be the weakened Malaysian Ringgit which made Malaysian goods and services cheaper, thus boosting exports of the country’s manufactured products. This in turn has provided a boost to the industrial property sector.

Based on the performance of the two sub-sectors and the prevailing economic environment, the market is expected to continue the positive momentum moving towards the end of 2021. But following the harrowing two years brought upon by the Covid-19 pandemic, the general consensus however believes that Negeri Sembilan’s property sector will improve in 2022 and perform slightly better than 2020 and 2021 although still below the pre-Covid years of 2017 to 2019. The state’s property scene is however expected to experience more robust activities especially in the SerembanKLIA corridor and Nilai where prominent projects such as Malaysia Vision Valley 2.0 (MVV 2.0), Bandar Sri Sendayan, Bandar Ainsdale, S2 Heights, Putra Nilai and Nilai Utama are already present. Property prices in this corridor will generally be stable but for those sited in good locations, they are likely to experience positive appreciation in the coming years. The long talked-about Malaysia Vision Valley 2.0 (MVV 2.0) remains a mega project in the state that has the makings of a successful economic and urbanisation programme. Under the plan, it will introduce new economic drivers, promote economic growth and has been planned as a game changer to unlock the value of Negeri Sembilan.

HB Perspective 2022

NEGERI SEMBILAN OUTLOOK 2022

Residential Overview & Outlook

Volume & Value of Residential Transactions in Negeri Sembilan (Jan-Sep 2019 to 2021)

The volume of residential transactions in Negeri Sembilan have seen a slight increase of about 4.6% from the first nine months of 2020 to the same period in 2021. There was also an increase in the value of transactions but by a larger margin at 18% for the same period. The majority of the transactions were in the range of RM100,001 to RM200,000 and RM200,001 to RM300,000 with the 2 to 3 storeys terrace houses being the most popular followed by the single storey terrace houses. Areas that showed the most activity were Seremban and Port Dickson.

10k

As the market around Malaysia has shown to pick up momentum in the residential subsector as early as the first half of 2021 in spite of the state of emergency and Movement Control Order (MCO) 2.0, Negeri Sembilan’s housing market also did not disappoint given its positive positions in the volume and value of transactions. And like the rest of Malaysia, buyers in Negeri Sembilan also leveraged on the Home Ownership Campaign (HOC) 2020-2021 for its incentives such as stamp duty exemption for instruments of transfer and instruments of loan as well as a minimum 10% discount on the property price from the developer. These factors contributed to the improved performance of the residential market in 2021.

Developers in the state were more focussed on clearing existing stocks of houses that they have launched instead of launching new projects. Most of the residential projects launched by developers over the past 3 to 5 years have been mainly double storey terrace houses priced in the RM400,000 to RM600,000 bracket. With the conclusion of the HOC and with no extension announced by the government, residential property sales may slow down especially as the market will adjust to the new normal of no HOC incentives in the early part of 2022. This may lead to an increase in the number of unsold houses but it is noted that Negri Sembilan has never been high up on the list of states with housing overhang. In any case, the better performance seen in Negeri Sembilan’s housing market in 2021 may be a temporal high for the state due to the helping hand from HOC. With the campaign over at the end of 2021 and no announcement of an extension into 2022, Negeri Sembilan’s residential market in 2022 is expected to perform not as brightly as it would’ve done in 2021.

HB Perspective 2022

9,539

7,432

7,099

2019

2020

2021

6k 4k 2,606.13

Volume

2,063.30

2,440.25

Value (RM Million) Source: NAPIC

Volume of Residential & Commercial Transactions (Q3, 2019 - 2020) 3,500

3,392

2,984

3,000 2,500

2,293

2,000 1,500 1,000 500 0

217

214

Q3 2019

157

Q3 2020

Q3 2021

Commercial

Residential

Source: NAPIC

Volume & Value of Commercial Transactions in Negeri Sembilan (Jan-Sep 2019 to 2021) 1,000 848

2019

800 600

548

400

500

2020

464.98

2021

434.36 318.43

200 0

Volume

Value (RM Million) Source: NAPIC

NEGERI SEMBILAN OUTLOOK 2022

Commercial Overview & Outlook There were fewer commercial transactions that took place in Negeri Sembilan in the first nine months of 2021 as compared to the same time period in 2020 which saw a reduction of about 8.8% in transactional activities. However, there was a noticeable increase in the value of commercial transactions which was 36.5% higher compared to the same period in 2020. 2 to 2.5 and 3 to 3.5 storeys shops were among the popular types being transacted and most of them were in Seremban and Port Dickson, and this was the same for the value of the transactions as well. With almost all economic sectors having been gradually opened since July 2021 after the National Recovery Plan (NRP) was initiated on 15 June 2021, commercial activities in Negeri Sembilan also saw a return to the market albeit at a slow rate. This perhaps is to be expected given its relatively smaller market size and population compared to neighbour Klang Valley which oftentimes also attracted folks in Negeri Sembilan to commute over for work on a daily basis in the pre-Covid-19 days. It is likely that after the interstate travel ban was lifted in October 2021, commuters have reinstated their daily commute to Kuala Lumpur and elsewhere in Selangor for their professional duties. Like the residential sub-sector, property developers in the commercial market will continue to concentrate on clearing existing stocks except for certain locations like Seremban 2 and Sendayan, where developers will be launching previously held back projects in the next 12 months barring any disruptions from Covid-19. Negeri Sembilan’s capital of Seremban has by and large been the commercial heartbeat of the state and since the 1980’s, several blocks of purpose-built offices (PBOs) have been erected in the city. Rental rates at these premises are currently about RM1.50 to RM2.20 per sq ft per month depending on factors such as age, condition and services provided by these buildings. With the tougher economic situation in the market brought on by Covid-19 that has yet to be fully overcome in 2021 and foreseeable also to continue into 2022,

this may motivate businesses to rent the more affordable shop lots and shopoffices over the PBOs in time to come. As the retail sub-sector was among the most battered during Covid-19 alongside the hospitality sub-sector, Negeri Sembilan’s retail market will continue to hold or perform slightly worse off than 2020. In fact, it will take some time before the retail sub-sector to return to pre-Covid-19 level. Generally, the population’s real income has dropped and this has resulted in lower buying power. In addition, as people are already used to buying things online given the lockdown, it will take some time for the trend can be reversed, if it ever happens. Between retail and hospitality, retail is expected to experience a resuscitation of business first in Negeri Sembilan although they are both incredibly affected by the Covid-19 pandemic. But to put things in perspective, hospitality is now considered as a luxury item due to the shrunken and continuing shrinking take-home pay including the mounting inflationary pressures moving into 2022. As such, any income generated by an individual or household is likely to be channelled into the more pressing items like food, utilities and some money to set aside for the rainy day. For investors at large, the retail subsector in Negeri Sembilan presents a better bet as compared to the hospitality sub-sector given its more flexible nature to meet and adapt to short term changes. Units used as retail lots can be subdivided, reduced or enlarged physically within a shorter time whilst it is much more convenient to substitute vacant lots with any kind of business compared to the hospitality sub-sector. As to how the market will perform in 2022, Negeri Sembilan’s commercial sub-sector is likely to do better in the new year than it has done so in 2021. This however also hinges on any possibility of a mass lockdown which if imposed will surely impede progress in the commercial property market.

Industrial Overview & Outlook There was a 6% increase in the volume of industrial transactions in the state in the first nine months of 2021 compared to the same period in 2020 while the value of transactions enjoyed a more significant 48% jump compared to the same period in 2020. Industrial properties above RM1 million were the most popular followed by the RM300,001 to RM400,000 and RM200,001 to RM300,000 segments. Terrace factory/warehouse led the transactions chart followed by the semi-detached factory/warehouse and vacant industrial plots with most of the transactions taking place in Seremban. Industrial properties in Negeri Sembilan have not witnessed any major changes like those happening in the Klang Valley, including adoption for a more fanciful purpose other than manufacturing, storage or distribution, except for one project which caught the attention of market players in the state - the successful sale of the first phase of the Hamilton Industrial Park, part of the Malaysia Vision Valley 2.0 (MVV 2.0) located to the south of the Nilai Industrial Estate. All 42 lots were in fact sold within months at a price of around RM50 to RM55 per sq ft, each with a land area ranging from 1.3 to 9.1 acres. This successful model reinforces the point that rightly priced vacant industrial land in strategic locations can still attract buyers regardless of the time and season, not precluding the aftermath of the Covid-19 pandemic. Taking cognizance of this flattering industrial result, supported too with the return of the state’s economy, NAPIC’s statistics and the ongoing projects chiefly the MVV 2.0, one can expect the industrial sub-sector in Negeri Sembilan to perform better in 2022 than it has in 2021.

HB Perspective 2022

MELAKA OUTLOOK 2022

MELAKA RIDING ON TOURISM IN 2022 After the drop in numbers in 2020, the first nine months of 2021 saw Melaka’s overall property market continue declining by 5.6% to 9,118 units in volume of transactions compared to the corresponding in 2020 while its value of transactions rose by 8.7% to RM3.1 billion. The signs of recovery seen in 1H 2021 with both volume and value of transactions rising 12.2% and 19.7% respectively compared to the same period in 2020 were however not sustainable. This is perhaps due to the shrinking demand induced by the various modes of lockdowns after the National Recovery Plan began from 15 June 2021. Melaka’s property market is expected to remain stable as businesses resume operations and gearing towards prepandemic levels. In addition, the historical state is also looking to welcome more new launches in early 2022 after most of the development approvals were obtained in H2 2021. Approved projects are mainly located on the fringes of Melaka Tengah District with new townships earmarked in Jasin and Alor Gajah Districts. Other notable developments include Taman Desa Bertam, Molek Residence (Phase 3), Taman Botani Parkland in Jasin, Bandar Scientex Jasin and PB Residence @ Rembia. Incentives provided by Budget 2022 to the SMEs are expected to motivate more demand for commercial and industrial properties in the state. This is in line with the country’s progressive lifting of various restrictions after the successful National Covid-19 Immunisation Programme which began in February 2021. It is also the reason behind Melaka’s aim to revive its tourism sector seeing that the VTL (Vaccinated Travel Lane) has been introduced between Malaysia and Singapore at the end of November 2021. Some of the mega projects worth noting in Melaka are The Sail, The Rise, Taman Botani Parkland, Taman Scientex and Taman Desa Bertam.

HB Perspective 2022

Factors to Watch • Current low interest rate to finance purchase of property is expected to continue in 2022. • Restrictions imposed on foreign tourists to visit Malaysia is likely to be lifted in 2022. This augurs well for Melaka’s tourism and its related industries and is expected to stimulate demand for hotel and commercial properties. Bright Spots • Steady growth for the residential sub-sector and landed medium cost/affordable housing will command better demand. • More SMEs are anticipated to expand their businesses to meet the higher demand from manufacturing of products and logistics facilities, leading to an uptrend in the industrial sub-sector. • Incentives for the SMEs from Budget 2022 seems to be more encouraging compared to previous budgets in 2020 and 2021. • Government’s initial announcement of the VTL (Vaccinated Travel Lane) with Singapore and the relaxation on inter-state travel has seen occupancy rates for Melaka hotels improve especially during the weekends and festive periods. • With more relaxations on foreign tourists and general improvement of Covid-19 caseloads worldwide, Melaka’s hospitality industry is expected to gradually return to normal in 2022. • Continuation of mega projects in 2022 includes The Sail, The Rise, Taman Botani Parkland, Taman Scientex and Taman Desa Bertam.

Outlook for 2022 • Melaka’s residential sub-sector is expected to see more positive growth in 2022. • The state’s retail sub-sector will remain challenging in 2022. • Hospitality is anticipated to chart a progressive return to normal in 2022. • Commercial shop lots and shop offices will gradually improve in 2022. • Melaka’s industrial market is poised to remain stable in 2022.

MELAKA OUTLOOK 2022

Residential Overview & Outlook

In terms of property type, the more sought after landed residences in Melaka have held their price points better in 2021 compared to the highrise apartments and condominiums. This is evident in places like the choice neighbourhood of Jalan Ujong Pasir where prices for semi-detached and detached houses had generally been stable while its single storey terrace houses registered an increase of about 9% from RM330,000 to RM360,000 per unit and double storey terrace houses going up to RM480,000 per unit. Apartments and condominiums on the other hand trended downwards by 5% to 10% compared to the previous year. Response to new launches for high-rises were also weak in 2020. Thus far in the first nine months of 2021, Melaka has seen 2,488 residential units launched on the market and these new launches have achieved a sales takeup rate of 41% or 1,020 units. This is an improvement over the 39.6% sales achieved in 2020 or 436 units sold out of the 1,100 units launched. It is also noted there were no new launches in Q1 2020 whilst Q3 2021 recorded the highest sales take up rate of 63.65% ie. 471 units from 740 units launched. The better sales performance could be attributed to ending of the lockdowns and the loosening of the SOPs in Q3. Some of

1,662

500

584.35 2,015

2,461

472.69

Q2 2020

664.71

2,498 Q1 2020

600.22

412.25 1,616

Q3 2019

2,117

2,449

2,323

2,738 Q2 2019

1,000

555.38

1,500

623.63

Units

2,000

724.98

2,500

632.52

There was a marginal 1.5% decrease in volume of transactions to 6,138 units in the first nine months of 2021 compared to the 6,231 units in the corresponding period in 2020. The overall value of transactions however went up by 9.8% to RM1.7 billion compared to RM1.57 billion in the same period, owing to higher priced properties transacted but unlike 2020, demand for homes priced under RM500,000 have been declining. This can be due to property buyers’ cautious spending pattern as their buying sentiments have been affected by the economic uncertainty and job insecurity arising from the pandemic.

3,000

Q1 2019

Volume

Q3 2020

Q1 2021

Q2 2021

Q3 2021

Value (RM, Million)

Source: NAPIC

Residential Volume by Type & Price Range Below RM500,000 (1H 2021) 1200 1,029

1000

857

800 Units

Melaka’s residential sub-sector has led the growth of the state’s property market spotting higher volume and value of transactions in 2021. It is expected to lead the state’s property market alongside development lands after having concluded more transactions in these categories in 2H 2020 and 1H 2021.

Volume and Value of Residential Transactions (Jan-Sep 2019 to 2021)

632

600 400

323 218

200

150

113 26

RM0 RM100,000

Landed

RM100,001 RM200,000

High-rise

these new projects are Taman Botani Parkland, Taman Desa Bertam (Phase 3), Molek Residence, Bandar Scientex Jasin and PB Residence @ Rembia. As there was also an increase in the submission of new development orders in 2021 compared to the muted year of 2020, more new launches can be expected in Melaka in Q1 2022. A cautionary approach must however be taken since there was a slight uptick of 5.7% in the state’s overhang residential properties from 2H 2020 to 1H 2021. In line with that, the state government had also imposed a high quota for bumiputra units and a limited release of bumiputra units for every project.

RM200,001 RM300,000

25 RM300,001 RM400,000

9 RM400,001 RM500,000

Source: NAPIC

Over the years, Melaka’s property market has progressed steadily, thanks to the state government’s push for economic and social development in areas such as industrial, housing, tourism and trade. On top of that, Melaka is said to have one of the lowest overhang properties in the country. Supported by a steady supply of houses in the state, Melaka should see more positive growth in the near future with upcoming projects in Kota Syahbandar, Taman Desa Bertam and Taman Belimbing Setia. Developers are also seen to be actively acquiring development land for future developments.

HB Perspective 2022

MELAKA OUTLOOK 2022

Retail Overview & Outlook

From the reduction of Work From Home (WFH) to the opening of F&B outlets and tourism destinations, supported also by the lifting of travel restrictions, Melaka saw a large influx of domestic tourists as recently as October 2021, giving business owners and travel operators a chance to finally breathe a sigh of relief. The good news is made much sweeter after the government announced the opening of VTL (Vaccinated Travel Lane) between Malaysia and Singapore in late November, enabling Malaysian visitors residing in the Republic to make their way into Melaka for their family visits and quick getaways among other activities. The VTL is subsequently halted at the end of December 2021 due to the emergence of Omicron variant. However, when the VTL is reinstated again in the near future after the risks of the new variant is much more understood and better controlled, it is expected to raise the take-up rates of commercial shop lots and shop-offices although it would not be the same for the retail units in shopping centres as the latter is currently in oversupply. Melaka’s retail challenge stems from a host of factors ranging from rental rates, flight of customers to online shopping, limited retailers in the market, high vacancy rates in existing retail outlets and the influence of mall oversupply some of which are almost dormant like the Elements Mall and Imperio Mall at Hatten City and Vedro Mall. There were 31 shopping complexes in Melaka as at Q3 2021 with a total retail floor space of 635,390 sq metres. Owing to the difficult business conditions over the past two years, the occupancy rate of the complexes has gone down from 67.45% in 1H 2019 to 67.48% in 1H 2020 and sliding further to 63.30% as at Q3 2021. The adverse prevailing conditions is expected to see the market to take a few years to recover and in fact, could be the last property subsector to recover in the state.

HB Perspective 2022

800k 700k 600k Space (sqm)

Malaysia’s high vaccination rate against Covid-19 is a reason to cheer for Melaka’s tourism sector as the containment of the virus means businesses have a better chance of getting back to normal even if it was in a gradual manner.

Shopping Complex Space & Occupancy (Half Year, 2019-2021)

500k

635,388

596,070

596,074

402,070

402,185

H1 2019

H1 2020

H1 2021

400k 300k 200k 100k 0

Existing Space (sqm)

Space Occupied (sqm) Source: NAPIC

Hospitality Overview & Outlook Where retail seemed challenging, looking brighter after the drought is hospitality which prior to this bout of resuscitation has seen The Ramada Plaza Hotel and Equatorial Hotel closed for operations in 2021. But no sooner than when the state borders were opened in October 2021, the hotels wrestled back 65% occupancy on weekdays (Sunday to Thursday) and 85% on weekends (Friday to Sunday). The rise in occupancy is a reminiscence of December 2020 when the state borders were open to domestic tourists after the MCOs. This shows that Melaka’s inherent popularity as one of Malaysia’s tourism darlings is an ultra-strong factor, one that should never be overlooked by investors mulling an entry into the historical state. Hospitality as such is looking at a progressive return to normal in 2022 with continuous relaxation for foreign tourists to enter Malaysia and a general improvement of the Covid-19 caseloads worldwide.

Office Overview & Outlook There were 48 privately owned purpose built office (PBOs) buildings in the state of Melaka supplying a total of 240,710 sq metres of office space as at Q3 2021. About 48% of the space is located within Melaka Town and another 47% in Melaka Tengah. The occupancy rate of the PBOs in the state as at Q3 2021 was 71% with Melaka Town recording a higher occupancy rate of 76.1% and Melaka Tengah a lower rate of only 63.8%. Although the market may spot a turnaround with returning tourists to fuel the retail and business sectors, Melaka’s office subsector is expected to remain stagnant in 2022 because business owners are caught between business growth and rental commitments. Without a strong indicator of a promising future, they are unlikely to commit to long term leases especially after weathering through the devastating pandemic. The saving grace in Melaka is however in its limited supply of purpose-built offices where this scarcity may prove to be favourable for the existing stock of shop lots and shop-offices as it may spur a higher take-up rate among the vacant units. If it pans out to be so, this category of commercial properties can look towards a gradual improvement towards 2022 as consumption will first absorb the existing supply of conventional shops in the market.

MELAKA OUTLOOK 2022

Industrial Overview & Outlook

Supply & Occupancy of Purpose-Built Office in Malaka (1H 2019-1H 2021) 83.50%

500k 411,050

402,247

400k

411,050

83.00% 341,303

334,783

328,395

83.00% 82.50%

300k

82.00% 200k

81.50%

81.60%

81.40%

100k

81.00%

2019

2020

Total Space (sqm)

80.50%

2021

Occupancy Rate (%)

Space Occupied (sqm)

Source: NAPIC

Volume & Value of Industrial Transactions in Melaka (Jan-Sep 2019 to 2021) 299

300

296.04

250

218

200

193.08

184

150

The industrial property sub-sector in Melaka appeared to have recovered in 2021 after the decline suffered in 2020 during the height of the Covid-19 pandemic. There was a 19% increase in the value of industrial property transactions in the first nine months of 2021 compared to the corresponding period the year before and an even higher jump of 53% in the value of transactions. The state is becoming an attractive destination for industrialists and this has led to an increase in demand for industrial properties in the state. In that regard, more SMEs are anticipated to expand into business activities that require industrial space as there is now an incremental demand for manufacturing and logistics. This is further boosted by the government’s better incentives allocated to the SMEs through Budget 2022 in comparison to those announced in Budget 2020 and 2021. The uptrend expected in the subsector shall see Melaka’s industrial subsector continue to be stable in 2022.

126.25

100 50 0

Volume 2020

2019

Value (RM Million) 2021

Source: NAPIC

Value of Industrial Transactions By Price (Jan-Sep 2019 to 2021) 209.63

250

117.73 0100,000

2019

100,001 200,000

2020

200,001 300,000

2021

300,001 400,000

28.34

79.87

7.1

7.3

1.76

6.65

7.06

3.64

2.43

5.45

2.68

3.25

2.99

1.29

3.54

8.16

60.86

100

53.98

150

1.65

Price (RM)

200

400,001 500,000

500,001 1,000,000

1,000,001 Above

Source: NAPIC

HB Perspective 2022

JOHOR OUTLOOK 2022

JOHOR – STEADY RECOVERY IN 2022 Transactions in Johor for the first nine months of 2021 saw a slight decline of 1.9% in volume to 24,657 units from 25,128 units compared to the same period in 2020. A reasonable growth was however spotted in its value of transactions, recording an increase of 8.5%, reaching RM12.3 billion from RM11.4 billion. Johor’s property market has more less performed as expected in 2021, girded with anticipation and expectations for borders to re-open with Singapore. Its commercial lifeline depends on it and to a large extent, impacts every facet of the market from daily retail consumables, leisure travel hospitality, industrialised business movements and uptakes of big-ticket items like property. While there may be differences between capital Johor Bahru and those further away like Pontian, Muar and Batu Pahat, how one reads the data shall dictate where they will spot the next opportunity after the Covid-19 dilemma, and this too has connotations to fellow Singaporean investors’ sentiments towards the southern state. On the whole in 2021, Johor’s residential sub-sector has improved from the pandemic year of 2020. This is consistent with Malaysia’s overall property market and part of the factors influencing the uptick are the incentives and discounts provided through the Home Ownership Campaign (HOC) 2020-2021, the low Overnight Policy Rate (OPR) that made financing home purchase attractive and the resultant effectiveness of the National Covid-19 Immunisation programme which went on an acceleration mode midway through has found itself in a sweet spot with restoration of confidence in the society and the market. With a different mood on the ground and supported by the National Recovery Plan that has gradually opened up all sectors of the economy from its implementation date of 15 June 2021 except for night entertainment, and also some provisions made through Budget 2022, not forgetting other governmental programmes and initiatives, the residential sub-sector is expected to remain soft but stable with hints of a recovery in 2H 2021 but better than 1H 2021 as it concludes 2021. 46

HB Perspective 2022

Factors to Watch in 2022 • Ongoing major infrastructural projects will provide a big boost to the economic development of the state and when completed will benefit the property market: - The completion of Johor Bahru Singapore Rapid Transit System (RTS) Link will be able to ease the congestion at the Causeway and Second Link and facilitate passenger flow across the borders between both countries. - The construction of the Iskandar Malaysia Bus Rapid Transit (IMBRT) with busway and stations is a key initiative to build up a comprehensive and efficient public transport network in Johor Bahru and provide a boost to the areas along the route served by the BRT. • Johor continued as the biggest residential property overhang contributor in the country with the many service apartment/soho and condominium projects that have been completed for some time remain unoccupied. This has deterred investors from investing in such properties. Some of the developers have begun offering substantial discounts in order to clear the unsold stock and some banks have also begun auctioning the apartments at much lower than the original selling prices. • The revised conditions under the MM2H (Malaysia My 2nd Home) programme have made it less attractive and will deter new applicants from applying. This will reduce foreign interest in Johor’s property market. Bright Spots in 2022 • The success of the National Covid-19 Immunisation Programme and the easing of the lockdowns have brought

back some life to the retail and hospitality sectors although it is still a long way before the situation can be restored to pre-pandemic levels. The start of the Vaccinated Travel Lane (VTL) between Singapore and Malaysia will help bring back some tourists from down south although the emergence of the Omicron variant has put the programme on the backburner. Without the foreign tourists, it is difficult for the retail and hospitality sectors to recover to their previous glory days. • The residential property market has not yet seen a sustainable recovery in 2021 but 2022 may see a better performance for the sector although the problem of oversupply and excessive vacant units will continue to weigh down on the service apartments/sohos and condominiums. Outlook for 2022 • The residential property market is expected to see an improvement particularly in the landed residential sub-sector. The service apartment/ soho/condominium sub-sectors will continue to be bogged down by the oversupply situation and lack of foreign interest. • The purpose-built office sector is expected to be stable in 2022 as there is not expected to be any significant increase in supply. • The hospitality and retail sectors will only see a sustainable recovery once foreigners are allowed to enter the country again without too much hassles. • The industrial property sector will continue to register a healthy performance in the coming year.

JOHOR OUTLOOK 2022

Residential Volume & Value Transactions in Johor (Jan-Sep 2018 to 2021)

Taking a page from the residential market’s performance, the overall Johor property market will also move into positive territory barring any major outbreak of the virus that will impede progress. Should things remain calm and with the pandemic brought under control, boosted also by the opening of the borders, Johor’s property market will be looking at a steady pace of recovery in 2022.

6,405.32

Residential Overview & Outlook The residential property market in Johor, just like all the other states in the country, was badly affected by the Covid-19 pandemic in 2020. The volume and value of residential property transactions for that year came down by 23.8% and 24.6% respectively. Although there were still lockdowns implemented in 2021 during MCO 3.0 and FMCO (Full MCO), the easing of the restrictions together with the ongoing Home Ownership Campaign (HOC) 2020/21 subsequently helped to stir activity in the residential property market. The first nine months of the year recorded a 5% drop in the volume of transactions y-o-y but interestingly, there was a marginal 2% increase in the value of the transactions. Johor Bahru was the most active followed by Kota

7,579.52 16,451

15,618

5,824.15

5,708.85

In terms of catalytic projects, Budget 2022 has allocated a total of RM4.6 billion for 434 development projects including 79 new projects in Johor and among them are the Gemas Electric Double Track to Johor Bahru and the Johor Bahru-Singapore Rapid Transit System (RTS) Link. Further away, Johoreans can look forward to the Muar Furniture Park and Sime Darby’s Bandar Universiti Pagoh.

2018 Volume

2019

2020

2021

Value (RM, Million)

Source: NAPIC

0100,000

100,001 200,000

2019

2020

200,001 300,000

1,290.45 927.42 955.39

500

927.81 745.15 726.50

1,000

592.73 480.89 436.44

1,500

1,231.20 940.00 1,010.37

2,000

300,001 400,000

400,001 500,000

2021

Tinggi and Pontian. The bulk of the transactions in Johor Bahru remains the 2 to 3 storeys terrace houses followed by single storey terrace houses but things were reverse for Kota Tinggi and Pontian as single storey terrace houses took the lead followed by 2 to 3 storeys terrace houses. The majority of the transactions were within the price range of RM500,001 to RM1 million followed by the RM300,001 to RM400,000 and RM400,001 to RM500,000 price brackets. As developers work to clear their existing stocks in 2021, some have proceeded to offer the Rent-To-Own (RTO) scheme in conjunction with the attractive discounts and incentives via HOC. New landed residences priced between RM500,000 to RM700,000 were also launched in

842.27 778.59 778.23

2,500

2,435.99 1,665.06 1,777.28

Value of Residential Transactions By Price Range in Johor (Jan-Sep 2019 to 2021)

235.40 171.74 137.94

Other positive contributing factors to the state’s recovery include the removal of the RPGT (Real Property Gains Tax) for disposal of property from the sixth year onwards, the RM2 billion Housing Credit Guarantee Scheme to assist participants from the informal sector to buy homes, special tax exemption for building and commercial property owners offering at least 30% rental discount to potential and the existing tenants and the allocation of RM1.5 billion for the continuation of housing programme such as the development of Rumah Mesra Rakyat. A slight reduction of developer’s selling price would not hurt as well so long as the income margins remains on track for the property enterprise.

21,591

20,341

500,001 1,000,000

1,000,001 Above

Source: NAPIC

H2 2021. This trend is expected to continue in 2022 although the market can expect launches to occur at a more random spread with some priced 10 to 25% higher in light of the rising material costs. In terms of residential property overhang, the state registered a marginal increase in the first nine months of 2021 to 6,509 units from 2020’s 6,166 units (excluding commercial titled sohos/ serviced apartments) and continues its top position as the highest contributor of overhang properties in the country. The bulk of the overhang is made up of sohos and service apartments and a large number of these are located in Iskandar Puteri which were targeted at the foreign market. However due to the pandemic and the suspension of HB Perspective 2022

JOHOR OUTLOOK 2022

the Malaysia My 2nd Home (MM2H) programme in 2020/21 which was subsequently imposed with a tall order of requirements, marketing efforts by the developers and sales agents were made futile as foreigners were not able to enter the country. In light of the oversupply, the state authority has stopped granting approval for high-rise apartments as one of the ways to mitigate the glut. The overhang numbers are anticipated to still rise in 2022 but at a slower pace in line with the slower incoming supply. Although overall residential transactions showed signs of picking up in 1H 2021, Johor’s residential sub-sector continued to be soft in 2H 2021 due to the Covid-19 pandemic, various forms of lockdown imposed throughout the year and the absence of foreign investors and buyers. To turn things around for a steady growth in 2022, some of the more viable solutions include the opening up of the border through mechanisms such as the VTL to encourage inflow of potential buyers and investors including Malaysians working and residing in Singapore, extension of the HOC in the primary market to 2022 and expansion of the campaign into the secondary market to alleviate the burdens of cash strapped property owners, and lowering down of the MM2H requirements.

Commercial Overview & Outlook Just like residential, the commercial property sub-sector in Johor saw a big drop in the volume and value of transactions in 2020, registering declines of 22.9% and 28.8% respectively. The sub-sector appeared to be fairly stable in 2021 where the volume of transactions was maintained at nearly at the same level but there was a 13.8% increase in the value of the transactions y-o-y. In terms of property type, 2 to 2.5 storeys shop lots along with 3 to 3.5 storeys shop lots were the most popular followed by vacant commercial lands. Over in the purpose-built offices (PBOs) sector, the supply in Johor recorded only a marginal change in the period from Q1 to Q3 2021 with occupancy more or less the same as 2020 levels. Unlike the residential sub-sector, there has been no significant increase in the supply of PBOs as developers were not constructing

HB Perspective 2022

Commercial Volume & Value Transactions in Johor (Jan-Sep 2018 to 2021) 25k 20k

2,695

2,611

2,076

2,066

15k 10k 2,321.28

2,358.24 1,679.03

1,911.69

5k 0

2018 Volume

2019

2020

Value (RM, Million)

additional office buildings in a big way. But the opening up of the economic sectors has certainly encouraged people to return to their respective work places instead of continuing to work from home. With the heightened activity in the market place, it will see the commercial market recover gradually and occupancy rate improved in prime locations with good connectivity, amenities and infrastructure. Further, the return of the workforce will also see a higher income generating capacity among the individuals and this will propagate interest for purchases of goods and services and lead to an increased demand in business premises like retail and office space. Johor’s retail sub-sector is expected to remain soft towards the end of 2021 as long as the border restrictions are still in place. This is in view of Johor’s heavy reliance on regional tourism and Singaporean shoppers for weekend holidays and shopping. As such, it will take some time before Johor’s retail market can return to pre-Covid-19 days. The hospitality sub-sector on the other hand is likely to experience a resuscitation of business first in Johor as compared to retail with domestic tourism enjoying a little breather from the long absence of tourists. This comes on the back of the high vaccination rate that led to the lifting of interstate travel restrictions.

2021 Source: NAPIC

As to where an investor can look to for potential investment between hospitality and retail in 2022, Johor Bahru has an equal favour for both as it presents a strong drawing factor to visitors from the Republic. Further away in Pontian, hospitality seems to have an upper hand while in Batu Pahat and Muar, retail has better chances since they are not big touristy destinations. Barring any new variant outbreak, Johor’s commercial sub-sector is poised for a steady pace of recovery and better prospects for properties in good location supported by convenient accessibility and reasonable prices. Other potentially strong factors to boost the market are the VTL, Johor’s very own Business Traveller & Centre (BTC) programme as announced by the state to facilitate short-term business arrivals from Singapore which is expected to begin in June 2022 and the special tax exemption for building/commercial unit owners extending at least 30% rental discount to the tenants.

JOHOR OUTLOOK 2022

Industrial Overview & Outlook

Areas such as Pasir Gudang and the Port of Tanjung Pelepas still remained popular locations for industrial properties and transactions in these areas were fairly active. A large number of the transactions were of vacant industrial land followed by terrace factory/warehouse and detached factory/warehouse. As signs of confidence are already prevalent in Johor’s industrial sub-sector in 2021, this market is anticipated to remain steady with anticipation for continuous demand and growth in 2022.

300

282 245

250

242 221 203

Units

200

182 157

150

134 95

100 50 0

Q1 2019

Q2 2019

Q3 2019

Q1 2020

Q2 2020

Q3 2020

Q1 2021

Q2 2021

Q3 2021

Source: NAPIC

Value of Industrial Transactions in Johor (Jan-Sep 2018 to 2021) 1,000 832.39

800 RM Million

Both the volume and value of industrial property transactions in Johor registered an improvement in the first nine months of 2021 which saw an increase of 33% in the volume and a marginal 3% rise in the value of the transactions. Notable transactions for this period include: • the purchase of a warehouse in Pasir Gudang by Axis REITs for RM32 million. • the development of a data centre in Nusajaya Techpark by GDS Holdings Ltd. • Tiong Nam Bhd’s acquisition of lands in Senai Airport City to build a warehouse. • Tropicana Industrial Park which started in July 2021 is currently undergoing site clearance and earthworks.

Volume of Industrial Transactions in Johor (Jan-Sep 2019 to 2021)

722.69 581.49

571.03

600

482.99

462.32

415.16

400

277.70

215.88

200 0

Q1 2019

Q2 2019

Q3 2019

Q1 2020

Q2 2020

Q3 2020

Q1 2021

Q2 2021

Q3 2021

Source: NAPIC

HB Perspective 2022

PAHANG OUTLOOK 2022

PAHANG – SOFT BUT STABLE IN 2022 The overall property market in Pahang experienced a 9.7% drop in the volume of transactions in the first nine months of 2021 from 11,460 units to 10,345 units whilst the value of transactions climbed marginally by 1% from RM3.64 billion to RM3.68 billion. The sluggish market was just as projected by us in our property forecast a year ago. Unlike the major states like Penang and Selangor which saw their property markets staging some form of recovery in 2021, the soft market conditions of 2020 continued into 2021 as far as the state of Pahang is concerned, with no strong rebound in the volume and value of transactions. Nevertheless, the overall market was stable. In terms of mega projects, Pahang will be embarking on a new international airport project which will be the first international airport of its kind in the east coast region of the Malaysian peninsular. Earmarked to be sited in Sungai Ular with a project value of RM10.5 billion, the new airport will be part of a 5,042 hectares aerospace city and is expected to be fully operational in 2026. The project is also expected to generate 50,000 jobs in the aviation related and non-aviation sector and simultaneously position it as a hub for aircraft Maintenance, Repair and Overhaul (MRO) services of international standards. The continuous project of the East Coast Rail Link (ECRL) is also another catalyst in the state for Pahang’s economy and together with the new airport, as well as facilities like the Kuantan Port, the Gebeng industrial plant, Kuantan Port, just to name a few, it will improve Pahang’s strategic factor in terms of transportation and logistics.

HB Perspective 2022

Residential Overview & Outlook The volume of residential property transactions for Pahang have been on a declining trend since 2019, recording a 16% drop in the first nine months of 2020 compared to the same period in 2019 and a smaller drop of 5% in the first nine months of 2021. Conversely, the value of residential property transactions have trended upwards with a 12% rise for the same period in 2020 and 6% jump in 2021. This is an indication that the average price of the residential properties transacted in 2020 and 2021 are higher than that of 2019.

Factors to Watch in 2022 • A prolonged pandemic would put further downward pressure on house prices especially for highrise properties near tourism areas such as the Cameron Highlands and Genting Highlands. • Low interest rates may boost demand for housing especially for landed houses.

A majority of the transactions were for single storey followed by 2 to 3 storeys terrace houses and single storey semidetached houses. Popular transactional value for these houses were from RM200,001 to RM300,000 followed by RM100,001 to RM200,000 and RM300,001 and RM400,000. Most transactional activities took place in Kuantan, Temerloh and Raub.

Bright Spots in 2022 • Encouragement of investment especially in the infrastructure development sector within the Kuantan District would spur economic growth and improve investors’ confidence. • Manufacturing and logistics companies may be more inclined to invest in the state as the ECRL (East Coast Rail Link) and proposed airport development in Sungai Ular will create a transit-oriented hub and the expansion of Kuantan Port will enable more cargo and vessels to dock at the port.

Popular residential areas in Kuantan include Pelindung, Bukit Ubi, Air Putih, Kuantan Garden and Tok Sira, whilst in Temerloh are Taman Temerloh Jaya, Taman Sri Semantan, Taman Rimba and Taman Bukit Bendera. In Bentong, preferred areas are the Bentong Makmur and Bukit Indah whereas in Raub are Taman Raub Jaya III and Taman Amalina Lestari.

Outlook for 2022 • Pahang’s residential sub-sector is looking to be stable with possibility of slowly picking up in 2022. • The commercial sub-sector in Pahang is expected to be stable but soft given a slight oversupply in the market in 2022. • Pahang’s industrial sub-sector will be stable but soft in 2022.

In terms of new launches, data gathered from NAPIC for Q3 2021 surprised many as Pahang is placed 4th on the ranking of states with the highest number of launches with 627 units released into the market. This is behind top rung Kuala Lumpur (1,378 units), followed by Melaka (740 units) and Selangor (628 units). While this does not mean Pahang has suddenly emerged as a strong property contender, it could however infer that property developers in the state may

have been launching at a comfortable pace throughout 2021 without being overly influenced by trends seen in the traditionally more active states. Further, although Pahang may rank high in Q3 2021, developers are likely to continue clearing existing stocks or previously held back launches and as such, 2022 may still not see as many new launches coming into the market.

PAHANG OUTLOOK 2022

With no risks or threat coming from overhang numbers in Pahang’s residential sub-sector, the market is expected to be stable as it ends 2021 and spot the same stability with the possibility of slowly picking up pace should all economic factors improve in unison.

Volume & Value of Residential Transactions in Pahang (Jan-Sep 2019 to 2021) 10k 8,276

Commercial Overview & Outlook

Over in the commercial sub-sector, Pahang’s volume of transactions in the first nine months of 2021 continued its decline by dropping 22% compared to the same period in 2020 but the decline was slightly more pronounced at 26% in the same period from 2019 to 2020.

Pahang’s value of transactions on the other hand saw its declining trend from 2019 to 2020 at -16% reversed in the following year by registering at 22%. There were several transactions of vacant commercial lands in Kuantan and Bentong which could have improved the value of commercial transactions during this period as it represents the highest number of transactions for the commercial sub-sector. This is followed by the 2 to 2.5 and 3 to 3.5 storeys shop-offices. Transactions were popular in Kuantan, Bentong and Temerloh with no new supply of purpose-built offices (PBOs) coming on stream in Pahang up until the first half 2021 and maintained at 420,570 sq metres of PBO supply in the market since 2020. Occupancy of PBOs, which in Kuantan usually congregates at Komplek Teruntum, Menara HSBC, Bangunan Tokio Marine Life, Menara Zenith and Wisma CDO, however declined slightly to 88.4% in 1H 2021 from 89.8% in 2020, suggesting perhaps businesses in Pahang were affected in more ways than one by the Covid-19 pandemic and the ensuing ripple effects of the lockdowns, shrinking demand, job losses etc. Popular commercial areas in Kuantan include Putra Square, Kuantan Star City and Sri Dagangan I. In Temerloh, it is along Jalan Tengku Ismail whereas in Bentong, they are along Jalan Loke Yew and Jalan Ah Peng. Popular areas in Raub are the Pusat Perniagaan Putra Raub and Pusat Perdagangan Raub.

2019

7,290

1,899.88

2k 0

2020

2021

6,920

Volume

1,672.18

1,572.29

Value (RM Million) Source: NAPIC

Supply & Occupancy of Purpose-Built Office in Pahang (2019 - H1 2021) 500k

100 420,374

420,570 378,853

400k

420,570 377,792

371,830

300k 90.10%

200k

89.80% 88.40%

100k 0

2019

2020 Space Occupied (sqm)

Total Space (sqm)

H1 2021

Occupancy Rates (%) Source: NAPIC

Volume & Value of Commercial Transactions in Pahang (Jan-Sep 2019 to 2021) 1,000

2019

868

800

2020

749.95

725.82 646

600

2021

612.89 507

400 200 0

Volume

Value (RM Million) Source: NAPIC

HB Perspective 2022

PAHANG OUTLOOK 2022

300

200 150 100

HB Perspective 2022

Volume 2020

2019

83.00

Industrial Overview & Outlook

Popular industrial areas around Kuantan are Kawasan Industri Ringan Bandar Indera Mahkota, Kawasan Perindustrian Semambu

136.21

133 106

A majority of the transactions were for the below RM100,000 properties followed by RM500,001 to RM1 million and then RM1 million and above categories. Transactions were also led by the vacant industrial lots followed by terrace, detached and semidetached factories respectively.

291.52

250

On the whole, the commercial subsector is expected to be stable in 2022 after some years of decline in volume of transactions but also soft given a slight oversupply in the market.

Value (RM Million) 2021

Source: NAPIC

Volume of Industrial Property Transactions by Price Range in Pahang (Jan-Sep 2019 to 2021)

1,000,001 & Above

19 14 500,001 1,000,000

400,001 500,000

30 20

The first nine months of 2021 has given Pahang’s industrial sub-sector a renewed sense of hope as it grew remarkably by 35% compared to the same period in 2020. This is also especially after registering -41% in the same period from 2019 to 2020. But the story is different in its value of transactions as it continued dropping from 53% in the first nine months of 2019 to the same period in 2020, followed by another 39% drop from 2020 to 2021. Perhaps catalytic projects like the ECRL have not really generated the kind of industrial outputs as yet seeing that it is still under construction while domestic demand for industrial properties on the other hand may also have been stifled due to market pressures, not least the Covid-19 effects. The resultant impact could have equally pressured property prices and pushed it lower than previous years which gave it the depressed value of transactions in spite of the increase in volume.

0.0 0.2 0.4 0.6 0.8 1.0

In any case, as the state of Pahang is also well endowed with a large portfolio of tourism products ranging from dense rainforests to the cooling temperatures of the highland resorts and down to the sandy beaches facing the South China Sea, the hospitality sub-sector is expected to make itself count again, and in fact better than retail, with no more restrictions imposed for local travel.

Volume & Value of Industrial Transactions in Pahang (Jan-Sep 2019 to 2021)

With the return of economic activities towards the second half of 2021, Pahang’s commercial sub-sector is looking at a gradual improvement in performance although it may be hampered by the state’s generally low spending powers arising from the lower income brackets compared to the major cities in Malaysia. This will also see it affecting the retail sub-sector.

0100,000

2019

100,001 200,000

200,001 300,000

2020

2021

and Kawasan Perindustrian Gebeng while in Temerloh and Bentong are Kawasan Perindustrian Temerloh and Kawasan Perindustrian Bentong respectively. Throughout 2021 and the pandemic season, things have not been as exciting for Pahang’s industrial sub-sector where although there has been some new adoption for industrial units for purposes like courier services, they have not been as significant as seen in other states. Given the sliding trend of volume of transactions and eroding value of transactions in the last few years, Pahang’s industrial subsector may see a year of stability in 2022 but generally still soft as a whole.

300,001 400,000

Source: NAPIC

TERRENGGANU OUTLOOK 2022

TERENGGANU SHAPING UP IN 2022 Terengganu’s overall property transactions in the first nine months of 2021 declined by 17.6% and 3.5% in volume and value of transactions compared to the corresponding period in 2020. This brought down the total transactions volume to 11,696 units valued at RM1.82 billion from 14,195 units valued at RM1.88 billion in the previous year. But like most of the economic indicators, Terengganu’s property market is expected to stand on a firmer footing come 2022 by outperforming 2021, especially in the residential and hospitality sub-sectors. This comes on the back of our forecast for 2021 which saw the residential subsector declining by 10 to 20% in prices from the previous year and an increase of vacancy in the shop houses and shopoffices. The oil-state can expect some excitement with mega projects like the Kerteh Polymer Park in Kemaman, the integrated development of Kemaman River Basin and the Simpang Pulai-Gua Musang–Kuala Berang Highway making its way into the market. Incidentally, there was a also a surprise in the value of transactions in the industrial property sub-sector in 2021.

Residential Overview & Outlook Transactions for Terengganu’s residential properties have been on a declining trend since Q1 2019 with the volume of transactions going down by 18.8% from 9,968 units in the first nine months of 2020 to 8,090 units in the same period in 2021. Value of transactions on the other hand eroded by 8.7% from RM1.28 billion to RM1.17 billion over the same period. This is in line with the forecast made for 2021 as sentiments towards residential properties in Terengganu is still wait-and-see due to the uncertainty in the economy caused by the pandemic. Vacant residential plots have been the most sought after followed by single storey terrace houses and 2 to 3 storeys terrace houses. Majority of the transactions exchanged hands in Kuala Terengganu followed by Dungun and Kemaman. Prices for Terengganu’s landed residential sub-sector are expected to further consolidate in 2H 2021 while the wait-and-see attitude that enveloped 1H 2021 will continue to prolong to the end of the year. With the prevailing market movements also foreseeable to spill into 2H 2021, Terengganu’s performance in the residential sub-sector is expected to conclude 2021 in a stable fashion.

Volume & Value of Residential Transactions in Terrengganu (Jan-Sep 2019 to 2021) 10k

9,983

9,968 8,090

2019

2020

2021

6k 4k 2k 0

1,331.91

Volume

1,286.14

1,173.10

Factors to Watch • Landed residential sub-sector will experience resuscitation in demand. • The release of new commercial offices into the market like the Menara MBKT in Kuala Terengganu is expected to further ease capital values and rental levels. • With new supply coming on stream such as the Mayang Mall shopping complex, 2022 appears to be a challenging year for the retail subsector. • Demand for industrial properties will slowly increase with the ongoing ECRL (East Coast Rail Link). • The hospitality sub-sector is expected to continue to show an encouraging trend in 2022 with the return of tourists to the Redang, Perhentian and Kapas islands. Bright Spots • The RM2 billion allocation by the government to the banks through the Housing Credit Guarantee Scheme to provide gig workers, small entrepreneurs and farmers access to financing to purchase houses. • The performance of the industrial sub-sector in 2022 is expected to gradually improve with the ongoing ECRL. • Tourism will return as a major income contributor to the state. Outlook for 2022 • Terengganu’s residential subsector is expected to hold steady in 2022. • Commercial market in the state is anticipated to hold steady in 2022. • A market revival is expected of Terengganu’s hospitality subsector in 2022. • Terengganu’s industrial market may spot an upward trend in 2022.

Value (RM Million) Source: NAPIC

HB Perspective 2022

TERRENGGANU OUTLOOK 2022

Commercial Overview & Outlook Consistent with the residential sub-sector, the commercial market also saw a declining trend where the volume of commercial transactions in the first nine months of 2021 reduced by 9.2% to 215 units compared to 237 units in the same period in 2020 while the value of transactions decreased more significantly by 58.3% in the same period from RM244.72 million to RM101.92 million. The increase in the vacancy of shop houses and shop-offices due to the pandemic could be the cause of the reduction in the volume and value of transactions in the state. In terms of property type, vacant commercial plots were transacted the most followed by 2 to 2.5 and 3 to 3.5 storeys shops. Areas such as Kemaman, Besut and Kuala Terengganu were popular for 2 to 2.5 storeys shops. Like the residential sub-sector, performance of the commercial subsector is expected to be better in 2022 compared to 2021 with developers also releasing existing stocks and previously held back launches. Prices of commercial properties including rentals are expected to consolidate in the new year given its state of plateau in 2021 with no influence from any of the Work From Home (WFH) arrangements as seen elsewhere like the bigger cities.

HB Perspective 2022

2,105

2,139

2,412

4,392

3,573

4,171

Q1 2020

Q2 2020

Q3 2020

Q4 2020

386.99

297.00

489.11

564.62

285.08

588.94

2k 412.11

In terms of new launches, performance in 2022 is envisaged to be slightly better than 2021 with developers expected to clear existing stocks or release previously held back launches. The release of these products will also be met with the government’s support through the Housing Credit Guarantee Scheme through a RM2 billion allocation to the banks as the enabler to provide gig workers, small entrepreneurs and farmers the opportunity to purchase houses. The successful roll out of this Budget 2022 initiative will spur positive movement in Terengganu’s residential market.

Volume of Residential Transactions (Quarterly, Q1 2020 - Q3 2021)

3,437

In 2022, prices and rentals are not expected to significantly vary from present levels except for properties in good locations. The glaring issue of overhang properties which has been exacerbated due to Covid-19 in Johor, Kuala Lumpur and Penang is of no concern in Terengganu too due to the scarcity of open titled lands and as such pose little to no threat to the market.

Q1 2021

Q2 2021

Q3 2021

Value (RM Million)

Volume

Source: NAPIC

Volume & Value of Commercial Transactions in Terrengganu (Jan-Sep 2019 to 2021) 350

309

2020

2019

300

244.72

237

250

2021

215

200

181.86

150 101.92

100 50 0

Volume

Value (RM Million) Source: NAPIC

Volume & Value of Commercial Property Transactions (Selected Quarters) 2

4 - 4.5 Storey Shop

3 - 3.5 Storey Shop

2 - 2.5 Storey Shop

20 4

1 - 1.5 Storey Shop

Pre-War Shop

0 0

Q3 2021

22 34

Vacant Plot

Q2 2021

Q3 2020 11

50 Source: NAPIC

TERRENGGANU OUTLOOK 2022

Volume & Value of Industrial Transactions in Terrengganu (Jan-Sep 2019 to 2021) 250

242.98

2020

2019

200

2021

150 100 50 0

34.54

30.40

Volume

Value (RM Million) Source: NAPIC

Hospitality Overview & Outlook Over in the hospitality sub-sector, hotel occupancy has shown a direct correlation to interstate travel and just like Q4 2020 when Terengganu saw improvement in its occupancy rate, Q3 and Q4 2021 also experienced a slight upward movement. This positive trend was further supported by the containment of Covid-19 in 2021 and the lifting of travel restrictions nationwide. Hotels will nevertheless see a slight drop in occupancy towards the end of 2021 due to the seasonal monsoon. Barring any unforeseen circumstances like another wave of Covid-19, the hospitality sub-sector is poised for a revival in 2022. The freedom to commute between states shall see tourists returning to Terengganu’s beautiful islands and beaches, and provide the much-needed boost to the state’s tourism industry. The same however cannot be said for the retail sub-sector as it will require more time to climb back to pre-Covid-19 levels. And as such, between hospitality, retail and offices, potential remains in hospitality as tourism has always been one of the major economic contributors in Terengganu.

Industrial Overview & Outlook In the industrial sub-sector, an anomaly has occurred in the volume and value of transactions between the first nine months of 2020 and the same period in 2021. According to the data, the volume of transactions had reduced from 21 units in the first nine months of 2020 to 15 units in the same period in 2021, registering a 28.57% decline. But when the numbers were stacked up in terms of its value of transactions, there was a significant leap from RM30.40 million to RM242.98 million over the same period, registering a 699% growth. This is an indication that higher value industrial properties were transacted during this period. Observation on the ground did in fact paint a rather subdued picture in 2021 with exciting innovations like turning an industrial unit into a central kitchen not visibly seen in the market. The lack of increase in the uptake also supports this deduction where industrial properties in Terengganu are generally still being utilised as a manufacturing, storage and distribution facility. But upon a closer look at the data, the staggering jump in the value of transactions is attributed to one detached industrial property located in Kemaman sold for RM232.21 million, signalling perhaps there is still a pot of gold hidden amidst the sluggish industrial property market. With some positive signs coming from the residential, commercial and hospitality sub-sectors, and also seeing that the statistics for Terengganu’s industrial properties having been quite stable since 2019 except for that one unique transaction, the industrial market might have bottomed out and can expect some upward price adjustment in 2022.

HB Perspective 2022

KELANTAN OUTLOOK 2022

KELANTAN – ANTICIPATING A STEADY 2022 Kelantan’s property market experienced a dip of 20.2% in its volume of transactions and a 1% decline in the value of transactions in the first nine months of 2021 compared to the same period in 2020. This brought the volume of transactions to 7,494 units of exchanging hands against the better showing of 9,388 units in the first nine months of 2020. In terms of value of transactions, both periods registered around RM1.3 billion, an indicator showing that perhaps the market has bottomed out and is ready for an upward movement in 2022. The growing confidence in 2021 could be attributed to the sentiments towards the better containment of Covid-19, a foreseeable future without the virus arriving soon and the incentives and discounts offered by property developers in conjunction with the Home Ownership Campaign (HOC). To that end, performance of the residential, commercial and agricultural segments increased slightly in 2H 2021 compared to 2H 2020 notwithstanding some waitand-see sentiments among potential buyers. 2022 is envisaged to be a slightly better year than 2021 with the agricultural, residential and hospitality sub-sectors looking to do well. Property developers are also expected to clear existing stocks and units from previously held launches. Aside from these, the Kelantan market can look forward to major projects on the ground to generate multiplier effects in the state’s economy and they include the Tok Bali Industrial Park, construction of the new complex for Malaysian Maritime Enforcement Agency (APMM), expansion and upgrading works for the Sultan Ismail Petra Airport (LTSIP), Kota Bharu-Kuala Krai Highway and the continuation of the ECRL.

HB Perspective 2022

Factors to Watch • An encouraging trend in 2022 for the hospitality sub-sector with the return of tourists and the spill over of tourists from nearby Terengganu. • Demand for industrial properties will slowly increase with the ongoing ECRL (East Coast Rail Link) and Central Spine Road (CSR). • The ongoing development of major infrastructure projects which will benefit the state’s economic progress and boost the property market include the Malaysian Maritime Enforcement Agency new complex in Tok Bali, PalekbangKota Bahru bridge, expansion & upgrading of Sultan Ismail Petra Airport (LTSIP), Kota Bahru-Krai Highway, Central Spine Road (FT 34 Kota Bahru – Simpang Belangai, Bentong), East Coast Rail Link (ECRL) and Stadium Complex in Bukit Merbau, Pasir Putih. Bright Spots • The re-opening of the economy will help businesses to recover from the pandemic although the serious floods which affected the state in December will slow down the recovery • The reduction in the Covid-19 infection rates and the allowing of inter-state travel will help restore confidence and allow people to carry on their normal lives. Developers will then be able to resume their marketing efforts to push sales of their projects

Outlook for 2022 • The residential property market is expected to be stable with an increase in transactions in 2022. • The focus will be on the building of landed residential properties due to the higher demand for such properties compared to high-rise residences. • The office market in 2022 is expected to be stable. For new office buildings, developers will look into providing better facilities and improved specifications. • The retail sector may see some challenges as the market will welcome the addition of new malls such as Platinum Mall. • The hospitality sector will see an improvement in hotel occupancy rates as interstate travel is now allowed and a return of tourists to the popular beach areas is expected. However, the annual occurrence of floods will continue to have an impact on tourist arrivals and hotel occupancy rates. • The industrial sector is expected to be stable in 2022.

KELANTAN OUTLOOK 2022

Residential Overview & Outlook Kelantan’s residential sub-sector is one of the forerunners in 2021 in the state having registered improvements up until 1H 2021 in both the volume and value of transactions as well as demand for units under construction. The positive momentum is improved slightly into 2H 2021 and conclude the year in a stable fashion which is a much better outcome than the softening season in 2020. Data from NAPIC showed that Kelantan’s residential market registered a slight increase in the volume of transactions in the first nine months of 2021 from 3,978 transactions in 2020 to 3,984 this year whilst the value of the transactions went up by 11.5% y-o-y, which could be due to more properties being transacted at a higher price range. It can be noted that there were more transactions of properties between RM300,001 to RM400,000 compared to the same period in 2020 although the median house price for Kelantan was RM235,000 as at Q2 2021, below the national median of RM300,000. An interesting trend was spotted in Kelantan’s transactional volume and House Price Index (HPI). Firstly, the state’s transactional volume experienced a drop in Q2 2021 but swiftly recovered in Q3 2021 and this could be attributed to the Movement Control Order (MCO) imposed at that time. When scrutinised further, the state’s HPI showed a rise of 2% in Q2 2021 from Q1 2021 or an 8.5% uptrend y-o-y. The upward trajectory is in fact the state’s highest recorded increase in the HPI for Q2 2021 on a y-o-y basis and bucks the national trend of a 1.2% decline. Perhaps the old adage of “what goes up must come down” still holds as the index eased by 0.65% in Q3 2021 from its high in the preceding quarter, and was still up by 5.5% compared to Q3 2020. As of Q3 2021, Kelantan has a stock of 86,210 residences, out of which 40% are made up of single and double storey terrace houses whilst detached houses contributed slightly more than 15% and low-cost houses at 31%. As there is limited supply of properties with nonMalay Reserve titles, property overhang is not an issue in the state.

Volume & Value of Residential Transactions in Kelantan (Jan-Sep 2019 to 2021) 5k 4,330 3,978

3,984

2019

2020

2021

2k 1k

571.69

Volume

658.46

590.58

Value (RM Million) Source: NAPIC

Supply & Occupancy of Purpose-Built Office in Kelantan (1H 2019-1H 2021) 400k 350k 300k

391,525

370,997

94.80%

391,525

370,997

94.80%

100%

391,077 366,357 93.70%

95%

250k 90%

200k 150k

85%

100k 50k 0

2019 Total Space (sqm)

2020 Space Occupied (sqm)

2021

80%

Occupancy Rates (%) Source: NAPIC

In 2022, the market is expected to either continue in a stable mode or decline slightly due to the possibility of a higher selling prices caused by the rising cost of building materials and labour. But the good news is that the government has stepped in to offer the Housing Credit Guarantee Scheme with a RM2 billion allocation announced in Budget 2022. This assistance will go a long way to helping gig workers, small entrepreneurs and farmers obtain financing with the banks to buy a home. Another boon is the exemption of RPGT for properties disposed of from the 6th year onwards. Although these are not drastic measures that can transform the market entirely, it is still a shot in the arm for the market.

Office Overview & Outlook The state of Kelantan has a total supply of 173,040 sq metres of privately owned purpose built office (PBOs) space contained in 123 buildings as at Q3 2021. Of this, 74% of the space is located within Kota Baru. Arising from the business slowdown due to the pandemic over the past two years, occupancy rates of the offices softened to 85.7% as at Q3 2021 but this is still quite healthy compared to the bigger cities. This could be due to the lack of PBOs in the state. The supply of office space in Kelantan is dominated by shop-offices and there are not many PBO buildings even in the capital of Kota Bahru. Like some of the states in Malaysia such

HB Perspective 2022

KELANTAN OUTLOOK 2022

as Terengganu and Sabah, the Work From Home (WFH) practice never really seeped into the Kelantan work culture during the pandemic and as such, there will not be any big movements of workers transiting back to the office in 2022. With market conditions looking better in 2H 2021, Kelantan’s office sub-sector is expected to recover gradually in 2022 with slight increases in terms of prices occupancy rates and rentals. The market is poised to hold steady in 2022 and perform better than 2021.

Retail Overview & Outlook There were 29 shopping complexes in the state of Kelantan offering a total retail space of 381,280 sq metres as at 1H 2021. 20 of these complexes or 69% of the total in the state are located in the capital of Kota Bharu. In terms of retail area, Kota Bharu’s share is even higher with a contribution of 92%. Although the pandemic did affect the retail businesses, the shopping complexes were still able to maintain a healthy occupancy rate of around 80% for both the state overall as well as Kota Bharu. We expect the retail sub-sector to remain quite stable going into 2022.

Hospitality Overview & Outlook

Industrial Overview & Outlook

Along with the opening of state borders, Kelantan’s hospitality market experienced a rise in occupancy in Q3 and Q4 2021. This mimicked the trend in Q4 2020 when interstate travel was also lifted after the extended lockdowns. Occupancy was however impacted towards the end of 2021 due to the monsoon season which saw heavy floods during this time hitting the state. But even so, hospitality will remain one of the leading property sub-sectors for Kelantan in 2021 and shall continue to do better in 2022 after the devastating Covid-19 saw tourist arrivals drop as much as 30% and occupancy plunged below 50% in 2020. Kelantan’s proximity to Terengganu is also a boon seeing that the two states share some common features such as the pristine beaches and beautiful islands as part of its proud tourism profile. As one of Kelantan’s major income generators, the hospitality sector will also enjoy a lift from the market and players can expect a revival of business in the new year. The retail sub-sector on the other hand will unfortunately require more time to get back on its feet despite being strongly correlated to tourism.

Volume & Value of Industrial Property Transactions in Kelantan (Jan-Sep 2019 to 2021) 250

220.03

200 150 100 50

32 7

Volume 2019

2020

HB Perspective 2022

24.24

17.46

Value (RM Million) 2021

Source: NAPIC

There was a significant drop in both the volume and value of industrial property transactions in Kelantan in the first nine months of 2021 with only 10 units transacted worth RM17.46 million compared to 40 units worth RM229.25 million in 2019 and 11 units worth RM50.04 million in 2020. The number of transactions of industrial properties priced above RM1 million also decreased sharply to only 6 units and 5 units in 2020 and 2021 respectively compared to 21 units in 2019. This is not surprising as the various phases of the MCO affected the smooth operations of businesses and this resulted in businesses scaling down or holding back on expansion plans, thus reducing the demand for industrial properties. Unlike the major cities where industrial properties have been repurposed and undergone some innovation to adapt to the new norm, this did not occur in Kelantan with factories and warehouses continue to function as a manufacturing, storage and distribution hub. The absence of new innovation however does not mean the sub-sector will not do well but quite the opposite, the industrial property segment is expected to continue to grow in the coming years especially in view of the strong demand for certain businesses eg. warehousing and logistics. Perhaps 2022 may unveil better reasons and opportunities for investors to relook at this segment seeing that the agricultural sub-sector has been identified as one of the strong pillars in Kelantan’s property market. This may influence some take-up in the industrial units such as the upcoming furniture town in Gua Musang, the Tok Bali Industrial Park and the RM300 million Taman Industri Industrialised Building System in Machang. These landmark projects should see improvements in Kelantan’s industrial sub-sector once the pandemic is brought under control and life returns to normal.

SABAH OUTLOOK 2022

SABAH RECOVERING IN 2022 In 2021, Sabah’s total property transactions for the first nine months recorded a rare increase when compared to other states in Malaysia with 11.2% rise in volume and 26% growth in value against the same period in 2020. In tangible numbers, this was a rise from 5,053 units valued at RM2.3 billion to 5,621 units valued at RM2.9 billion. But the delicate nature of tourism has been tested far and wide by Covid-19 and in Sabah, it was stretched the whole nine yards. Going by what was forecasted for 2021, the year unfolded as predicted with secondary locations’ properties, retail shops in the shopping centres and high-rise residences all experiencing some form of price corrections. For the record, this price adjustment had begun from as early as Q3 2020. The weakened condition continued when more properties were foreclosed but not taken up as swiftly in the open market. Bidders were said to have held back unless prices dropped significantly to make it more attractive but such outcome was not meant to be or at least not yet under the overcast spell. There were however glimmers of hope in niche pockets like landed residentials, traditional shop-offices and industrial lots, not forgetting exemption from RPGT (Real Properties Gains Tax) for properties sold after the fifth year in possession. But like all states in Malaysia, Sabah’s economic locomotives can only really pick up when immigration borders are fully open to domestic and international travel. The abracadabra will then spark off a chain reaction of growth in other property sub-sectors including that of other economic sectors. The only exception may be palm oil where crude prices have galloped to as high as RM5,071/tonne on 20 October 2021 and again on 3 November 2021 after the positive trajectory touched RM3,621/tonne in December 2020 from just RM2,074/tonne in May the

Factors to Watch • A number of major infrastructure projects being undertaken will provide a boost to the state’s economy and ultimately benefit Sabah’s property market, they are: - Pan-Borneo Highway’s continuous implementation. - Redevelopment of the Tanjung Aru Eco Development (TAED) comprising hotel, resort, residential, commercial, parks and recreational areas. - RM7 billion mega coastline project at Meruntum on 160 hectares of coastline land (Lok Kawi Resort City; a joint venture between Yayasan Sabah and WCT Holdings Bhd). - Sepanggar Bay Container Port Expansion. Bright Spots • As there were not many new launches over the past two years, developers were able to focus on selling off their ongoing completed projects, especially with the help of the Home Ownership Campaign (HOC) 20202021. • The re-opening of international borders which is expected in 2022 same year. Those invested in the palm oil sector would undoubtedly have had a reason to smile after the property market took a beating in 2020. As part of the state’s continuous plan for urbanisation, Sabahans can look forward to projects like the continuation of the Pan-Borneo Highway, Tanjung Aru Eco Development (TAED), the Mega Coastline Project at Meruntum valued at RM7 billion and the Sepanggar Bay Container Port Expansion as catalysts to move the market.

will bring back tourists and provide a boost to the hospitality and retail sectors. • Palm oil has enjoyed a good year as CPO prices have gone up in 2021 and this has supported the state’s economy. The state contributes about 25% of the country’s raw oil palm exports. Outlook for 2022 • The residential property market is expected to recover and do well in 2022 barring any major surge of Covid-19 infections. Landed properties will perform better than condominiums/apartments. • Occupancy rates of purpose-built offices (PBOs) will remain fairly stable. • The industrial property sector will continue its recovery into 2022. • The retail and hospitality sectors in the state will take some time before they can recover to pre-pandemic levels.

Residential Overview & Outlook The residential sub-sector in Sabah appeared to have shown some signs of recovery in 2021 with the volume of transactions in the first nine months of 2021 increased by 8.4% y-o-y from the corresponding period in the previous year while the value of transactions rose by a higher margin at 25.6%. This compares with declines of 21.4% and 23.9% respectively for the corresponding period in 2020 which was badly hurt by the Covid-19 pandemic.

HB Perspective 2022

SABAH OUTLOOK 2022

The year 2022 will primarily witness developers clearing existing stocks and releasing units from previously held back launches. These alone shall be enough to meet market demand since not much activity was registered from the muted 2020 and 2021. New launches are therefore likely to be few and far between in 2022. Barring any further viral outbreak and political instability, Sabah’s residential market is expected to be good in 2022 with landed residential taking the lead.

HB Perspective 2022

1,218

474.16

Q2 2021

1,028

404.25

Q1 2021

1,198

501.73

Q3 2020 Q2 2020

182.83

Q1 2020

1,525

536.21 561 1,090

379.88

Q3 2019

1,361

507.96

Q2 2019

1,090

418.81

Q1 2019

1,591

516.91

500

1,000

1,500

2,000

Value (RM Million)

Volume

Source: NAPIC

100 50 0

Q1 2020

Volume

262

162.87

194 78

150

139.61

200

140.22

250

224

242.16

300

272

Commercial Volume & Value of Transactions in Sabah (Quarterly, Q1 2020-Q3 2021)

49.58

High-rise properties on the other hand were given a hand by the HOC, especially in the overhang category where units were being sold at a steady pace. Freebies and incentives extended by the developers as sweeteners were proven to be effective. This bodes well for Sabah’s market in 2022 as the risks of increasing the overhang inventory is also almost zero given the minimal launches seen in 2020 and 2021.

Q3 2021

211

Through the lacklustre 2020 and its spill over effects into 2021, there wasn’t much activity on the ground to see new stocks added to the market but in spite of the situation, Kota Kinabalu spotted some resilience in landed residences. This can be attributed to the scarcity factor and also the heightened land cost that has led to more high-rise developments in recent years. As such, the additional premium needed to be paid to acquire a landed residential home is considered to be worth the trouble to land the lucrative deals by the buyers and investors.

Residential Volume & Value Transactions in Sabah (Quarterly, Q1 2019 - Q3 2021)

132.8

From Q2 to Q3 2021, the value of transactions also increased by 17%. Aside from the relaxations from MCO 2.0, the rise in performance could also be attributed to the continuation of the Home Ownership Campaign (HOC) to the end of 2021, giving buyers the opportunity to still secure their homes with incentives thrown in by the developers. This has also helped developers clear their unsold stocks.

Q2 2020

Q3 2020

Q1 2021

Q2 2021

Value (RM Million)

Q3 2021 Source: NAPIC

Commercial, Retail & Hospitality Overview & Outlook Like the landed residential, Sabah’s shopoffices in good locations are prized for its value due to its scarcity with buyers and investors having no qualms paying a premium for them. With the market also returning to some form of normalcy in the era of new normal in 2021, commercial premises were sighted with more activities as consumers made their way to their usual haunts. But “usual” in this sense may not connote “same” anymore as some businesses have called it a day and made way for more adaptable and newer enterprises to fill the vacuum. Performance of the commercial offices and shop-offices will however take about 1 to 2 years for it to come back to pre-pandemic levels.

For the first three quarters of 2021, both the volume and value of commercial property transactions saw an increase of about 4.28% and 41.91% respectively compared with the same period in the previous year. The majority of the commercial property transactions were for 2 to 4.5 storeys shoplots followed by shop units/retail lots at 142 and 78 units respectively. In Q3 2020, there were 145 units of 2 to 4.5 storeys shoplots transacted, suggesting that the popularity of this segment still held itself together in the same period in 2021. The supply of purpose-built office (PBOs) space in the state increased marginally to 103 buildings with a nett lettable area of 827,992 sq metres as at 1H 2021 compared to 100 buildings with a nett lettable area of 799,613 sq metres for the corresponding

SABAH OUTLOOK 2022

In retail, the challenge lies in the peculiarity of visiting enclosed and crowded places. The fear surrounding such visits will unfortunately continue to linger until full confidence returns. The dicey atmosphere leaves retailers with little choice but to chase after the numbers in order to survive. As such, the market can only expect to have some semblance of steady recovery in 2022 but its sustenance is very much dependent on externalities beyond its control. Being innovative hence must be a prerequisite for these surviving retailers. As for the hospitality industry, Sabah’s heavy reliance on international travellers has its merits despite not having the borders open as yet. But when it does, the pendulum is expected to swing strongly to usher in the much-awaited foreign travellers back. The question on everyone’s lips is, “When? When will the international borders finally be opened?” Moving forward, the commercial market in Kota Kinabalu in 2022 is not expected to be vibrant, in fact quite the opposite. But if investors have an inkling to take advantage of the sluggish environment, Sabah’s hospitality industry may be a good candidate to look at given the state’s recordbreaking arrivals pre-Covid-19. Further, this market is also considered young and vibrant compared to its peers around Malaysia and when one looks at it from that perspective, it may suddenly provide investors with more room to explore and a sort of dynamism that could be absent in other locations.

156.83

156.63

150

127.69 112.6 100.2

100

85.59 60.41 36.48

23.65 86

The story is not much different in retail and hospitality as picking up the pieces has not really been that easy, more so when the borders have been shut to foreign tourists for extended periods. Some form of recovery will nevertheless take shape in the hotels by the end of 2021 as local businesses have been allowed to operate including cross border travel between states.

200

Generally, businesses in Sabah preferred to locate their offices in traditonal shopoffices as the rentals as well as operating costs for such premises are lower. The pandemic did not have a very big impact on the occupancy rates of PBOs due largely to limited supply in the state. Nevertheless, some companies took the opportunity to relocate to shop-offices as they needed less space after their businesses were impacted by the pandemic-induced slowdown and to reduce costs.

Industrial Volume & Value Transaction in Sabah (Quarterly, Q1 2019 - Q3 2021)

period in 2020. The overall occupancy rate of PBOs went down slightly from 90% in 2020 to 87.8% in 2021.

Q1 2019

Q2 2019

Q3 2019

Q1 2020

Q2 2020

Q3 2020

Q1 2021

Q2 2021

Q3 2021

Volume

Value

Source: NAPIC

Industrial Overview & Outlook As forecasted in 2021, the industrial sub-sector continued sustaining investors’ interest throughout the year mainly due to the conventionally low-tech utilisation of such properties as a place for manufacturing, storage and distribution. But given that Covid-19 has also almost transformed the business landscape, industrial lots became highly suited to meet the sudden and heightened need for logistics. The transactional value of industrial properties in Sabah increased by 31% even though the volume of transactions dropped by 10% during the Q1 to Q3 period in 2021 compared to the same period in 2020. This indicates that the transactions were of higher value properties. There was an announcement of a notable industrial investment in Sabah by South Korea’s SK Nexilis which involves a proposed investment of RM2.3 billion to set up a production base in Kota Kinabalu Industrial Park (KKIP). SK Nexilis will build a copper foil manufacturing facility with an annual production of 50,000 tonnes. This project will increase job opportunities in the area whilst at the same time generate higher demand for housing to support the working population there.

industrial sub-sectors in 2021. Prime movers have been the online businesses because the market was in need of a quick alternative solution to the usual but pricier courier services to send and receive goods affordably amid the various modes of lockdown. The typically large floor space of industrial units as such lent itself as the best candidate to meet this demand. Another innovative scheme is by the F&B operators who have adapted well to the rapidly changing market. Their new business model has seen them taking up industrial units to cater to the preparation and supply of processed and semi-processed food to the restaurants and eateries out in the market. Although the numbers are not as significant, the emergence of industrial lots repurposed as central kitchens have been one of the positive developments in the industrial sub-sectors. With the market having adapted well to the new normal without any interest waning in 2021, Sabah’s industrial sub-sector is positioned to do well in 2022.

The tremendous growth enjoyed by logistics and logistics-related companies during the Covid-19 season has in itself rewarded the HB Perspective 2022

SARAWAK OUTLOOK 2022

SARAWAK – STABLE & GROWING IN 2022 The state of Sarawak has experienced a growth in the overall property transactions volume and value in the first nine months of 2021 compared to the same period in 2020. In terms of volume, it went up by 14.6% to arrive at 15,783 units from 13,775 units while in value, it rose by a higher margin at 34.6% to RM5.4 billion from RM4 billion. The positive growth makes Sarawak one of the few that have seen its market turnaround in the period under observation compared to the other states in the country. It is also heartening to know that the 12th Sarawak state elections held on 18 December 2021 and the forecast of the Sarawak property market in HB Perspective 2021 share one thing in common, the results were almost predictably accurate. While the state elections did not spring much surprises as to which party will remain in power and whether or not Tan Sri Abang Johari Openg will continue as the Chief Minister, our forecast also could not have departed further from our analysis with the long-standing favourite landed residential properties continue to be taken up more than the high-rises and the fellow sub-sectors of commercial and industrial both showing recovery and resilience in 2021. Results such as these were displayed as early as the first half of 2021 by NAPIC’s official data compared to the corresponding period in 2020. But aside from the strong demand for landed residential, the capital of the state, Kuching experienced a slight drop in the transacted volume for residential, industrial, agricultural and development sectors in 1H 2021 compared to 2H 2020 with only a slight increase in the commercial sub-sector which can be attributed to the opening up of the economy after the lockdowns. From NAPIC data also, there was a decrease in new planned supply, starts and completion in the residential and commercial sub-sectors and as such, the year 2022 will mostly see developers concentrating on clearing the existing stocks accompanied with launches in landed properties to meet market demand. In terms of overhang properties, there was a steep increase of 77.01% in the commercial sub-sector in 1H 2021 in Sarawak from 1H 2020. Shophouses make up a big majority

HB Perspective 2022

Factors to Watch in 2022 • A number of major infrastructure projects undertaken in Sarawak will provide a boost to the future development of the state’s economy when completed, they include: - construction of the Coastal Highway and bridges. - construction of the Pan Borneo Highway which includes: • upgrading of federal roads from 2 to 4 lanes, construction of 115 bridges, 25 elevated interchanges, 3 rest and service areas and 6 lay-bys. (Phase 1 one package completed (WPC01 - from Telok Melano to Sematan – 33km); • connecting the highway to Simanggaris in Kalimantan (Indonesia) by the 3,901km Trans–Kalimantan Highway South (10 more packages under construction and expected to be completed in June 2022 and 2023) • Phase 1 connecting Telok Melano-Sematan–Miri comprising 12 work packages covering 786.41km with a project cost of RM16.12 billion. • Phase 2 connecting Miri and Lawas covering 98km. • Jalan Johari Sunam – Jalan Kemena in Bintulu measuring 4.5km currently under construction. • Kuala Kemena Jepak Bridge in Bintulu measuring 1,283m costing RM467 million currently under construction and expected to complete in April 2023. • upgrading Route 8101 Jalan Datuk Mohd Musa where in Kuching there will be 4 additional lanes, 3 new bridges, pedestrian walk and street lighting along Jalan Kota Samarahan in Kuching with a total 11.6km costing RM229 million expected to complete in 2023. • new Mukah Airport at 7km from Mukah Town sited on 115.3-ha with a terminal area of 3,120sqm and 1.5km runway costing RM300 million replacing the old

short take-off and landing strip. New airport is completed and commenced operation on 17 June 2021. • Sarawak’s Petrochemical Hub (SPH) at Tanjung Kidurong, Bintulu, sited on 432-ha with a GDV of RM16 to RM20 billion per annum, currently under construction. • The proposed second Kuching Samarahan Trunk Road, Kuching & Samarahan Division with a bridge over Sg. Sarawak at Sejingkat. Bright Spots • Landed residential in suburban areas. • Sarawak does not have a high residential property overhang as there is no over building and overbearing launches of new projects. • The decision of companies to adopt a work from home (WFH) arrangement did not seem to have a major impact on the demand for office space in the state. • The industrial sector was affected by the supply chain and logistics issues during the pandemic as experienced in other states but the impact on the industries in Sarawak have not been that substantial. • Expansion of the Samajaya Free Industrial Zone. Outlook for 2022 • The residential property market has shown signs of a recovery in 2021 and this trend is expected to continue into 2022. • The purpose-built office market is expected to be stable in 2022 as there is limited new supply coming onto the market. • The industrial property market will continue to do well in 2022 and will benefit from the completion of the major infrastructure projects currently being constructed in the state.

SARAWAK OUTLOOK 2022

Q2 2020

29.39% -25.67%

Q3 2020

Q1 2021

Q2 2021

Percentage Change (%)

Volume

2,672

2,065

2,828

1,254

-1.77% -21.56%

Q2 2019

-36.89%

1,987 Q1 2020

-11.58%

Q1 2019

2,778

125.52%

8.76%

2,329

2,634 -5.99%

2,533

Q3 2021

30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40

Source: NAPIC

Value of Residential Property Transactions in Sarawak (Quarterly, Q1 2019 - Q3 2021)

Q1 2019

Q1 2020

29.36%

882.7

Q2 2021

-22.99%

893.67

Q1 2021

-33.58%

Q3 2019

Q2 2020

Q3 2020

Percentage Change (%)

Volume

879.4

382.83 576.34

Q2 2019

679.81

-13.00%

200

-14.46%

400

-19.73%

635.36

600

717.97

800

-1.23%

133.44%

1000

Q3 2021

35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35

Source: NAPIC

Volume of Commercial Property Transactions in Sarawak (Quarterly, Q1 2019 - Q3 2021)

Q2 2019

Volume

Q3 2019

Q1 2020

Q2 2020

Percentage Change (%)

462 30.51%

Q1 2021

-38.22%

Q1 2019

354

72.49%

45.06%

395

200

229

300

100

Q3 2020

339

424

400

-32.45%

500

573

600

-20.05%

The commercial property market in Sarawak saw a sharp decline in both volume and value of transactions in 2020 due to the lockdown imposed during MCO 1.0 which had a big impact on businesses. The volume and value of transactions came down by around the same margins at 33% and 32% respectively. The first nine months of 2021 however saw the market staging a recovery as the volume of transactions in this period jumped by 44% and the value of transactions leapt by 78%.

Q3 2019

500

-12.58%

Commercial Review & Outlook

1000

485

As there is a decrease in the new planned supply, starts and completion in Sarawak’s residential properties, developers are expected to focus on clearing their existing stocks and launch more landed properties. Moving forward, the trend of recovery spotted in 2021 in the sub-sector is expected to continue into 2022.

1500

-9.51%

Based on NAPIC’s data, there were 1,161 residential units launched between Q1 and Q3 in 2021 with a sales take-up rate of 23.7% over the nine months period. There were also 1,862 units of overhang residential properties worth RM702.96 million. Bulk of the units launched comprised condominiums and apartments but based on our analysis, landed residential properties enjoyed higher sales take-up rates compared to the high-rises.

2000

742.76

The total volume and value of residential property transactions recorded in the first nine months of 2021 showed signs of recovery after it was adversely impacted in 2020 by the Covid-19 pandemic which resulted in a decline of 19% in the volume and 10% in the value of transactions. In the first nine months of 2021, the market recovered with an increase of 23.83% in the volume of residential property transactions whilst the value of transactions went up by 31.79% y-o-y, a sign that was already shown by the statistics as early as the first half of 2021.

2500

-8.11%

Residential Review & Outlook

3000

536

Sarawak’s property market ended on a stable growth fashion in the second half of 2021 and this will set the state off in positive momentum going into the new year. As such, 2022 is poised for a year of stability and positive performance with potential growth in landed residential and agriculture vacant lands.

Volume of Residential Property Transactions in Sarawak (Quarterly, Q1 2019 - Q3 2021)

-7.11%

of the overhang. This is however anticipated to reduce in 2022 as the supply has receded due to Covid-19.

Q2 2021

Q3 2021

80 70 60 50 40 30 20 10 0 -10 -20 -30 -40

Source: NAPIC

HB Perspective 2022

SARAWAK OUTLOOK 2022

150

Q2 2020

Q1 2021

Q2 2021

30 0 -30 Q3 2021

Percentage Change (%)

Volume

8.1%

Q3 2020

-53.28%

464.29

Q1 2020

216.91

134.05

173.94

6.07%

Q3 2019

234.47

50.99%

Q2 2019

202.4

-17.31%

Q1 2019

-22.93%

-28.95%

100

244.83

200

230.83

279.14

300

120

129.39%

400

-60

Source: NAPIC

Industrial Volume & Value Transactions in Sarawak (Quarterly, Q1 2019 - Q3 2021)

119.81

93 65.64

56.52

135

120

140.61

80.21

120

142

150 138

The commercial sub-sector of the state on the whole is expected to slowly resuscitate in 2022 given that in Kuching alone has seen a mushrooming of supermarkets in 2021. With most of the commercial activities having returned to their official business premises for day-to-day operation, business is looking to have come back to normal. But to ensure a safe distance at work, it may require a bigger working space or utilise the age-old shift system like the manufacturing plants. Demand as such for larger premises may gradually seep back into the market again after Covid-19 is more contained and under control.

500

-7.11%

There was a total supply of 527.08 sq metres of privately owned purpose-built offices (PBOs) in Sarawak as at 1H 2021 with a recorded occupancy of 86.4%, slightly up from the 85.4% recorded in 2020. The work from home culture implemented during the pandemic did not appear to have much impact on the purposebuilt office (PBO) market due to its limited supply. Moving forward, the PBOs market is expected to be stable in 2022 as there is limited new supply of such properties coming into the market.

Value of Commercial Property Transactions in Sarawak (Quarterly, Q1 2019 - Q3 2021)

100.52

There were 1,389 units transacted in the first nine months of 2021 with a total transaction value of RM915.67 million with most of the transactions for 3 and 3.5 storeys shops followed by stratified shops.

Industrial Review & Outlook The industrial sub-sector in Sarawak was fairly stable in the first nine months of 2021 with an almost similar number of industrial properties at 349 units changing hands compared to the same period in 2020 at 348 units but with a higher value of transactions of RM326.06 million or a 37% rise against the RM237.25 million in the same period in 2020. In terms of property type, there was a high number of semi-detached industrial properties transacted during this period followed by vacant industrial plots. 2021 also saw the expansion of factories like Taiyon Yuden, Longi, ILJIN and Western Digital in Samajaya Free Industrial Zone in Kuching. Utilisation of industrial factories and warehouses have so far been confined to manufacturing, storage and distribution with little or unnoticeable change for innovative adoption like central kitchens in Klang Valley. Sarawak’s industrial property market is expected to continue doing well in 2022 and will also stand to benefit from the completion of the major infrastructure projects currently being constructed in the state.

HB Perspective 2022

30 0

Q1 2020

Volume

Q2 2020

Q3 2020

Q1 2021

Value

Q2 2021

Q3 2021 Source: NAPIC

Retail & Hospitality Overview & Outlook The massive natural greenscapes of Sarawak and its indigenous communities steep in cultural identities and values have been the cornerstone of tourism for the state. With Covid-19 having blocked all entry for travel by neighbouring states and also international tourists, the retail and hospitality sub-sectors have suffered just like her peers elsewhere in the country. But unlike most other states in Malaysia, Sarawak’s retail may have a better and earlier chance of a revival before hospitality does and this is due to the present demand from the local market itself. This proves that a selfsustaining economy is a reliable model that could see a locality through in times of crisis.

At present, the performance of the retail sub-sector has not reached pre-Covid-19 levels with businesses especially in the down town areas relying on tourists looking to continue its challenging days. For it to come around, it has to wait until the cumbersome quarantine requirements and other SOPs are eased so incoming tourists can flock again to the beautiful and rich Sarawak.

RETAIL OUTLOOK 2022

RETAIL – COUNTING ON MALAYSIAN SHOPPERS IN 2022 Overview of the Malaysian retail property sector in 2021 and what’s to come in 2022. The supply of retail space in Malaysia increased marginally in Q3 2021 where it rose to 16.875 million sq metres from 16.840 million sq metres in 2020 and 16.425 million sq metres in 2019. The occupancy rate on the other hand declined to 76% as at Q3 2021 from 77% in 2020 and 79.5% in 2019. Two rounds of lockdowns disrupted the business of shopping centres in the country for the most part of 2021. The first lockdown occurred early in the year when the second Movement Control Order (MCO 2.0) was implemented from 13 January 2021 till 4 March 2021. The majority of retail trades inside shopping centres were ordered to shut down temporarily during this phase and popular shopping malls in the country suffered a major drop in shopping traffic by as much as 90% as compared to December 2020. When MCO 2.0 ended on 5 March 2021, shopping traffic more or less recovered with malls across the country receiving large crowds on the first weekend after the movement restriction was lifted. Most tourist towns also witnessed good crowds on weekends. Shopping traffic however started to drop again in April 2021 due to the high daily positive cases of more than 2,000 for about two weeks, affecting shopping traffic of shopping centres in the country and despite the Hari Raya festival, consumers tried not to go out as often as they had in March 2021. The interstate travel ban which continued to be enforced throughout the Hari Raya festival also saw shopping centres located in shopping districts that are usually popular with tourists affected. In fact, since the second MCO started in January 2021, Malaysians from all parts of the country were not able to visit these high-quality malls located in the major cities that were not found in their own hometowns.

Supply of Retail Space in Shopping Malls (2019 to Q3 2021) 16,875,250 16,840,380 16,425,180

Malaysia 3,084,730 3,131,430 3,132,670

K.L.

3,717,400 3,730,670 3,564,910

Selangor

2,442,260 2,469,650 2,343,120

Johor 0

Q3 2021

10M Nett Floor Area (sqm)

Q3 2020

Q3 2019

15M

20M Source: NAPIC

Supply & Occupancy Rate of Retail Malls in Malaysia (Q3 2019 to Q3 2021) 16,875,250

Q3 2021

12,919,370

16,840,380

Q3 2020 13,048,640

16,425,180

Q3 2019

13,059,410

5M Existing Space (sqm)

10M Space (sqm)

15M

Space Occupied (sqm)

20M

Source: NAPIC

After the continuous surge of daily positive cases, the third MCO (MCO 3.0) was implemented from 3 May 2021 until 31 May 2021. During this period, retailers in the HB Perspective 2022

RETAIL OUTLOOK 2022

shopping centres suffered from poor sales when Malaysian shoppers consciously avoided enclosed places. A small consolation however came from 7 May 2021 when individuals with ‘Low Risk’ status on their MySejahtera apps were allowed to enter shopping centres. Subsequent to that, the Covid-19-driven Hotspot Identification for Dynamic Engagement (HIDE) system started from 8 May 2021. A long list of shopping centres and hypermarket malls were ordered to close for three days because they were identified as potential pandemic risk locations. This application was however removed in just a few days after complaints from shopping center operators, retail tenants and consumers. Following the cessation of HIDE and beginning from 25 May 2021, many shopping centres discontinued the manual logbook registration as well and non-MySejahtera users were not allowed to enter these malls. At the same time, the government also imposed a maximum of two hours of shopping time for every shopping centre and hypermarket mall. When the Full MCO (FMCO) was enforced from 1 June 2021, shopping traffic in major shopping malls in the country plunged by 95%. During this period, non-essential retailers were ordered to close for business. Then when the National Recovery Plan (NRP) Phase 1 was subsequently introduced on 15 June 2021, shoppers were asked to stay home. The rule of maximum of two persons per vehicle was also imposed by the government and in addition to that, children under 12 years old were prohibited from entering the shopping centres. The Enhanced MCO (EMCO) was later implemented in place of the FMCO in the entire urban area of Selangor and selected areas of Kuala Lumpur from 3 July 2021 for a period of two weeks. Klang Valley’s retail sector encompassing areas in Kuala Lumpur and Selangor, which accounted for 60% of the total market size in Malaysia, was severely hit during this period. It was also by around this time in July 2021 where retail landlords around the country began actively trying to get all its staff, tenants and third-party contractors to be fully vaccinated. Several vaccination centres were even set up inside the shopping centres to facilitate better convenience. In Klang Valley, participating malls included the Mid Valley Megamall, 1 Utama Shopping Centre, IDCC (Ideal Convention Centre) Shah Alam, Centro Mall in Klang, KL Gateway Mall and Tropicana Gardens Mall. Outside of Klang Valley, there

HB Perspective 2022

were Gurney Paragon Mall in Penang, AEON Midtown Falim Shopping Centre in Ipoh and Mid Valley Southkey in Johor Bahru. With the National Covid-19 Immunisation Programme well underway and increasingly more and more people were vaccinated, 16 August 2021 marked the day when shopping centres around the country began allowing fully vaccinated individuals to enter the malls. More good news then ensued in October when fully vaccinated adults were also allowed to bring along children aged 17 years and below into the retail premises. With the doors now opened to the public, shopping traffic began building up from August 2021 and by the time Malaysia was into the final two months of the year, shopping traffic have returned in all major shopping malls around the country with major malls packed with shoppers and diners not just on the weekends but also on the usually quieter weekdays. Be that as it may, sales have not returned back to the pre-pandemic level due to several reasons: • The capacity limit imposed on in-store shoppers in a retail store and the controlled seating capacity in F&B outlets. • For retail stores, there was a set permissible time limit that one can spent within the store while for the F&B outlets, restrictions on seating arrangements discouraged social gatherings. • During recent lockdowns, many retail and F&B outlets let go of some of their staff in order to save costs. It would take time to recruit and train new staff. • Malaysia’s economy was still in the process of recovery. Therefore, take-home pays are still lower than pre-pandemic level. The Langkawi Domestic Travel Bubble pilot project was launched on 16 September 2021 and in less than two months, it received more than 240,000 visitors. The interstate travel ban on the other hand was subsequently lifted on 11 October 2021 after 90% of the adult population have been fully vaccinated. Malaysians from all parts of the country then started their holidays and family visits once the interstate borders reopened and retail businesses that have been dependent on tourists saw an improvement in business. The freedom to travel was however curtailed by the serious floods in parts of Kuala Lumpur, Selangor, Pahang, Johor and the East Coast region in the final three weeks

of December 2021. Fortunately, it did not affect the retail sentiments during the yearend festive season for the majority of the population in Malaysia. Except for shopping centres situated in the seriously flooded areas, major shopping malls in other parts of Malaysia were still crowded with shoppers on both weekdays and weekends. This flood also allowed many shopping centres and retail stores to play an important social role to help flood victims. For example, a shopping centre in Shah Alam was used as a shelter for stranded customers on the first day of the heavy rain and following that, several shopping centres and popular retail stores began setting up counters for public donations to aid the flood victims. Many retail stores also donated their merchandises to help the affected residents.

Rental Waivers and Rental Rebates Many retail landlords in the country gave rental rebates to non-essential retailers during the two major lockdowns in 2021 and rebates were only given to tenants on a case-tocase basis during the implementation of the lockdowns. Rental defaulters were however not as alarmed due to the government wage subsidy assistance and the provision of loan moratoriums to delay loan repayments to the financial institutions. Some retail landlords also allowed tenants to pay the outstanding rentals on an installment basis without interest or penalty. Compared to 2020, rental rebates did not apply to all tenants that closed down during MCO 3.0, FMCO and Phase 1 of the National Recovery Plan (NRP) because retail landlords on the other end of the bargain were not getting full loan moratorium from their banks, unlike the assistance given during MCO 1.0 between March and May 2020 where the bank’s moratorium to the landlord was automatic. This round, automatic moratorium applied only to individuals and Small & Medium Enterprises (SMEs) but shopping centre owners were not eligible. In view of the situation, the financially stronger establishments like Majlis Amanah Rakyat (MARA) extended a 3-month rental exemption to all its commercial properties’ tenants throughout the country from July until September 2021. It also gave a 30% discount on rental payments from October to December 2021. This benefited 5,913 tenants.

RETAIL OUTLOOK 2022

Another was by the Sunway Group where in August 2021, the company introduced Sunway Malls SME Retailers Relief Financing Programme for its qualified SME retail tenants located in the Klang Valley, Penang, Ipoh and Johor Bahru. Eligible retail tenants could apply for the RHB Bank financing facility amounting to RM500,000 with a loan tenure of seven years, whereby up to 80% of the principal financing amount was guaranteed by Credit Guarantee Corporation Malaysia Bhd. In addition to rental rebates and instalments, AEON Malls also offered financial loans to its tenants located in all parts of the country through its Aeon Credit Service (M) Bhd.

Klang Valley Retail Property Market in 2021 As at December 2021, the Klang Valley (Kuala Lumpur, Selangor and Putrajaya) had 286 shopping centres with a total supply of more than 7.7 million sq metres of retail space and on the whole, the average occupancy rate declined from 73.5% in 2020 to 72.3% in 2021. As in the previous year, this decline was due mainly to the impact of the Covid-19 pandemic which affected almost the entire period of 2021. Honing in to the states in Klang Valley, the average occupancy rate of shopping centres in Kuala Lumpur dropped from 75.9% in 2020 to 74.6% in 2021 while Selangor’s decreased from 71.0% in 2020 to 69.7% in 2021. Malls in the administrative capital of Putrajaya however maintained its average occupancy rate at 83.6% in 2021, no change from 2020. In terms of the average rental rate, it dropped marginally from RM108.71 per sq metre per month in 2020 to RM108.60 per sq metre per month in 2021. The decline in average rental rate for 2021 however did not take into account the rental rebates extended by many shopping centre owners during the various stages of the lockdowns. Over the course of 2021, many existing shopping centre owners continued to offer rental rebates or reduce rental rates in order to retain existing tenants. Some tenants agreed to the restructured rental package in order to achieve a win-win situation for all.

A high number of shop closures took place during MCO 2.0 in 2021 but it did not end just there as the latest wave of closures continued plaguing the industry after MCO 3.0 ended in August 2021. But despite the many shutters during the Covid-19 pandemic, Malaysian individuals and companies were still investing in all kinds of retail businesses. There were also many new F&B outlets (including cafes, restaurants, food stalls, food kiosks and food trucks) that opened for business in 2021. Several retail and services trades also became new tenants in the shopping centres, they are made up of: • Small-format grocery-related shops which enjoyed better sales during the lockdown period. Snacks’ specialty stores (such as Mix.com) and ready-to-eat convenience stores (such as Family Mart and CU) became tenants of many popular shopping malls. • Fixed-price stores became popular since the Covid-19 pandemic due to its very affordable retail goods. They have become mini-anchor tenants of many shopping centres in the country, examples are Eco-Shop, SuperSave, Mr. Dollar, Noko, Tatsumaki and several others. • The popularity of food delivery during the pandemic gave birth to cloud kitchens in the Klang Valley. Some of them are tenants in shopping centres, examples include My Ghost Kitchen, Cookhouse, Kitchen Connect, Foodle, COOX, Foodlab etc. • Furniture and furnishing retailers that require large space at lower rental are returning to shopping centres with retail landlords welcoming them to fill up hardto-lease retail space.

New Mall Openings in the Klang Valley for 2021 Two new shopping centres and one mall extension were opened in 2021 with a total nett floor area of more than 215,000 million sq metres. Setia City Mall added a new wing to its existing shopping mall and opened in March 2021 with Lulu hypermarket as its anchor tenant. The 52-storey Permata Sapura Tower office development has two levels of retail space while Pavilion Bukit Jalil opened on 5 December 2021. As at early December, anchor tenants which have opened in Pavilion Bukit Jalil included Parkson, HOHM, The Food Merchant, Eight Avenue, Mr.DIY, Toys”R”Us and Harvey Norman. Other upcoming anchor tenants within this large shopping mall include Dadi Cinema, Food Republic, Discover Siam by Siam Piwat, an ice-skating ring and a 4,366 sq metres exhibition hall.

Malaysian Retail Property Sector Outlook 2022 Since November 2021, shopping traffic has returned to all major shopping malls throughout the country with major shopping malls packed with shoppers and diners on the weekends. This is testament that the shopping behaviour and patterns of Malaysian consumers are back to pre-pandemic levels. When interstate travel was allowed since the middle of October 2021, retail businesses that have been dependent on tourists began receiving good response. Shopping centres in Kuala Lumpur city centre, Petaling Jaya, Damansara and Bandar Sunway have also welcomed Malaysian shoppers from all other states in the country in large numbers. Shopping centres located in other major cities, towns, resort towns as well as resort islands have also received tourists from all parts of Malaysia.

Retail Supply & Demand in Klang Valley 2021 Location

No. of Malls

Total Nett Floor Area (sq m)

Average Rental Rate (RM psm pm)*

Average Occupancy Rate (%)

Kuala Lumpur

121

3,490,782

125.40

74.6

Selangor

161

4,030,919

105.15

69.7

Putrajaya

215,349

81.48

83.6

286

7,737,050

108.60

72.3

Total

Notes: # Include hypermarket malls and arcades. * Exclude rental rates of anchor tenants such as supermarket, department store, cineplex, bowling alley etc. Source: Henry Butcher Retail

HB Perspective 2022

RETAIL OUTLOOK 2022

In light of the vibrant visits, shopping traffic in shopping centres in most parts of Malaysia will continue to grow until the February 2022 due to two major festivals - Christmas on 25 December 2021 and Chinese New Year on 1 February 2022. The high 4-digit daily positive cases nevertheless remain worrisome with the new Omicron variant spreading rapidly across the world as a real potential risk to the retail business. Malaysia’s first Omicron-infected case was announced on 3 December 2021 and this provided the government with a valid reason to delay the country’s transition into the endemic phase due to the uncertainty surrounding the virus and its transmission rate. A potential fourth-wave of the pandemic as such continue to haunt retail landlords and shop tenants with the non-essential retailers hanging in the balance as they are unlikely to be able to weather through another forced closure of physical stores. While the shopping malls have been filled with domestic consumers and shoppers, foreign tourists remain absent in Malaysia and it may take up to six months to see a meaningful number of tourist arrivals. The current entry requirements are however a hindrance to this cause as it entails too much a hassle to attract leisure tourists. This will have a negative impact on major shopping malls located in the Klang Valley, Johor Bahru, Penang, Melaka, Kota Kinabalu and many other resort islands. Aside from that, prices of basic necessities and many consumers’ goods have risen in recent weeks with many F&B outlets having increased their prices due to the inflationary pressures. It is expected that this higher priced environment will continue into the next six months with rising cost of living as a factor that will affect the purchasing power of Malaysian households in 2022. Undeniably, the Covid-19 pandemic has caused a reduction in take-home pay for most Malaysians and the well-being of this income stream is highly dependent on the pace of recovery of the Malaysian economy in 2022. Economics 101 may also tell us that when the country’s economic activities are vibrant, more people will have secured jobs and with that, more of them will possess a higher pay package. When take-home pays are high, or higher, they are then more willing to spend more on consumers’ goods and services. But with every crisis comes opportunity, the Covid-19 pandemic has undoubtedly forced retail landlords to pay closer attention to greater digitisation of their businesses in order to widen their propensity for the “catch”. Retail landlords 68

HB Perspective 2022

Klang Valley Shopping Centres Opened in 2021 Name

Location

Nett Floor Area (sq m)

Setia City Mall Phase 2

Setia Alam

41,806

Permata Sapura Tower

KLCC

6,503

Bukit Jalil

167,225

Pavilion Bukit Jalil Total

215,534 Source: Henry Butcher Retail

New Shopping Centres in the Klang Valley for the Year 2022 Name

Location

Nett Floor Area (sq m)

Mitsui Shopping Park Lalaport

Bukit Bintang

79,989

Datum Mall

Setiawangsa

29,636

Semenyih

15,794

Ecohill Walk Mall IOI City Mall Phase 2

Putrajaya

92,903

Jalan Tun Razak

120,774

8 Conlay

KLCC

12,077

KSL Esplanade Mall

Klang

65,032

The Exchange TRX

Senada Shopping Centre Total

Bukit Kiara

21,460 437,665 Source: Henry Butcher Retail

in the new normal are hence expected to invest more in such digital infrastructure (including software, hardware and human) that allows its shoppers to buy goods and services in multiple formats with ease.

New Retail Supply in Klang Valley for 2022 At least seven new shopping centres and one mall extension located in all parts of the Klang Valley are expected to open in 2022 with a total nett floor area of over 4.7 million sq metres. They are: 1. Mitsui Shopping Park Lalaport - targeted for opening on 20 January 2022, it features over 300 retail shops and F&B outlets, a 9,290 sq metres Malaysian Grand Bazaar dubbed ZEPP Kuala Lumpur, a concert hall & an entertainment hub with 2,500 seats equipped by Sony Music Entertainment and Jaya Grocer as its grocery anchor. 2. Datum Mall - completed in Q2 2021 but has yet to open to the public, confirmed anchor tenants include Pacific Marketplace, Pacific Concept Store and Pak Tam wedding hall. 3. EcoHill Walk Mall - completed in 2021 but has not opened its doors to the public. Lulu Grocer is its anchor tenant. 4. IOI City Mall Phase 2 - opening to the public by Q2 2022 and will offer a wide selection of retail shops and F&B outlets, a canopy-covered outdoor street retail promenade, a 3,716 sq metres exhibition hall, a cineplex with IMAX hall, edutainment

centre, entertainment centre and a rooftop sports centre complete with a gym. Confirmed anchor tenants include AEON, GSC with IMAX hall, Best Denki, Food Empire, Maju Home and Proton. 5. The Exchange TRX - Anchor tenants include the Seibu department store, an upscale supermarket by Dairy Farm’s International and a new cinema concept by GSC. 6. 8 Conlay’s Lifestyle Retail Quarters - a 9-storey boutique mall for retail shops and F&B outlets. It forms part of a mixed-use development with two residential towers to be managed by Kempinski Hotel as well as a tower block consisting of hotel and service suites. 7. The KSL Esplanade Mall - confirmed anchor tenants include AEON MaxValu Prime, TGV, EnergeXPark, Mr.DIY and Ashley Furniture. 8. Senada Shopping Centre - the 3-storey mall is part of the Senada Residence development that includes two residential towers and an office block. Due to the Covid-19 pandemic and the current retail oversupply, Klang Valley shopping centres targeted for opening in 2022 will face challenges to fill up most of their retail lots upon opening. To attract permanent tenants to open in their shopping centres, retail landlords will need to lower rental rates and/ or offer longer rent-free periods. At the same time, they need to seek temporary tenants to fill up empty lots, especially at prime locations.

ART AUCTION

2021’S FINALE WRAPS UP A REMARKABLE YEAR Henry Butcher Malaysian & Southeast Asian Art Auction achieved RM4.27 million in sales in just three hours. Henry Butcher Malaysian and Southeast Asian Art Auction final auction for the year recorded RM4.3 million of sales in just three hours with 124 Lots successfully sold at the Galeri Prima on 5 December 2021. Total auction sales for this year (including auctions held in March and August) reached RM11.6 million, a record in the company’s history. The top-selling Lot is a masterpiece painted by Datuk Ibrahim Hussein in 1984, titled Hillview (Pemandangan Bukit), which sold for RM588,000. The sale room witnessed a prolonged bidding between the phone bidders for this beautiful artwork, with the first bid starting at RM380,000.

Director of Henry Butcher Art Auctioneers Sim Polenn considers 2021 a remarkable and miraculous year.

Ibrahim Hussein, Datuk, Hillview (Pemandangan Bukit), 1984, acrylic on canvas, 102 x 102cm.

Next was Datuk Syed Ahmad Jamal’s 2002 Kampung Sungai Cincin masterpiece, sold for an impressive RM470,400 which doubled its lower estimate (starting bid) of RM235,000. The third highest value Lot sold was Abdul Latiff Mohidin’s Pago-Pago which sold for RM442,400. The other rare piece by the same artist titled Rebirth (1970) did not sell during auction but was immediately sold post-auction. Featuring a whitish or off-white mane dancing figures titled Siri Tari – Zakwan by Yusof Ghani, collectors took the chance to obtain the beautiful masterpiece which went through an intense bidding lasting up to six minutes before finally achieving RM403,200, doubling its lower estimate (starting bid) of RM200,000. A piece by celebrated contemporary artist Eng Hwee Chu titled Black Moon 13, 1992, was sold at RM252,000. The bidding started at RM150,000 between two phone bidders.

Two pieces from Awang Damit Ahmad’s celebrated series Essence Of Culture (E.O.C) (Intipati Budaya) were each sold for RM89,600. Painted between 1985 to 1995, the series has become the most popular among collectors as the enchanting art pieces present a victorious story from life struggles, depicted by fishermen and farmers who faced weather challenges. In the same way, ordinary folks also face their fair share of struggles but with persistence, painstaking effort, fervent and steely determination, they will overcome the daunting challenges and make an honest living. Collectors also took the opportunity to obtain pieces from Southeast Asian artists. Lim Tze Peng’s Songs Of The Heart was realised at RM52,640 while Bui Xuan Phai gouache piece sold for RM44,800. Two works of Vietnamese

artist Nguyen Tu Nghiem on offer were sold for RM28,000 each. “We are grateful for the continuous support from the collectors and art lovers from all around during this challenging time, and in the past years,” said Sim Polenn, Director of Henry Butcher Art Auctioneers. “I was given the chance to lead the company in 2016 (annual sales RM2.4 million). In a short span of five years, our team has managed to grow the annual sales by almost five times, it is a remarkable and miraculous journey throughout. “We are encouraged to see that the collectors pool is growing, and it will continue to grow in the coming years.”

HB Perspective 2022

ART AUCTION

Syed Ahmad Jamal, Datuk, Kampung Sungai Cincin, 2002, acrylic on canvas, 83.5 x 122cm

Abdul Latiff Mohidin, Pago-Pago, 1967, oil on canvas, 78 x 78cm Yusof Ghani, Siri Tari - Zakwan, 1987, oil on canvas, 201 x 160cm

Eng Hwee Chu, Black Moon 13, 1992, acrylic on canvas, 167 x 228cm Abdul Latiff Mohidin, Rebirth, 1970, acrylic on canvas, 91 x 76cm

Appreciate Art,

HB Perspective 2022

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