Malaysia Real Estate Industry Update Quarter 1 2012

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$ 1 088 - December 2012 - by Business Monitor International - 64

Summary

Table of Contents

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Data Series

Industry

Real Estate

Country

Malaysia

Keywords

Property Development
Commercial Real Estate

Includes 3 FREE quarterly updates

The Malaysia Real Estate report examines the commercial office, retail, industrial and construction
segments throughout the country in the context of strong 2012 data. With a focus on the principal cities of
Kuala Lumpur, Johor Bahru and Kota Kinabalu, the report covers the rental market performance in terms
of rates and yields over the past 18 months, and examines how best to maximise returns in the
commercial real estate market while minimising investment risk.

Our latest round of in-country interviews (conducted in July 2012) suggest that the market is not yet
saturated, and investment may continue to increase as players look to more stable markets than the US
and eurozone. Nevertheless, our in-country sources have reported increasing fears of oversupply in the
market and a small portion of our rental indicators noted year-on-year contraction over the first six
months of the year.

A big driver for growth in construction is the government's Economic Transformation Programme (ETP),
launched in December 2010. The government identified 131 projects with a total investment value of
MYR794.5bn (US$215mn). At the end of 2011, 46 projects with an investment value of MYR95bn
(US$31mn) had been confirmed. MYR36.6bn (US$12mn) of this is for investment in the Mass Rapid
Transport (MRT) programme and MYR28bn (US$9mn), or 30%, is for investment in the oil, gas and
energy sector. Investment in tourism includes the development of the MYR600mn (US$196mn) Marina
Island Pangkor 2nd International Resort and Entertainment Island, which includes waterfront property
development. In April 2012 it was reported that the ETP had exceeded its 2011 target, achieving 23% of
its Key Performance Indicators (KPIs).

Key Points

- Although we had expected construction activity in Malaysia to recover in 2012, the sector's
stellar performance in Q212 has exceeded our expectations, prompting us to revise up our fullyear
real growth forecast for 2012 to 11.5% (from a previous forecast of 6.2%). Looking ahead,
we remain relatively bullish about the Malaysian construction sector over the coming quarters,
but believe that it is unlikely construction activity will grow at the blistering pace seen in H112.

This outlook is because headwinds from a weakening global economy are already dampening
demand for residential and non-residential buildings.

- We continue to expect the consensus estimate on Malaysia's real GDP growth for this year,
which presently stands at 4.1%, to move closer to our core view for a more subdued growth rate
of 3.8%. The disappointing reading of China's purchasing managers' index has reinforced our
core view for a hard landing in the Chinese economy, which in turn compels us to maintain a
bearish outlook on Malaysian exports.

- Despite the Pakatan Rakyat coalition's growing popularity in recent years, partly due to its multiracial
and pro-democracy platform, we believe that this will nonetheless be insufficient to unseat
the ruling Barisan Nasional (BN) at the upcoming general election. We expect the announcement
of a generous election budget for 2013 by Prime Minister Najib Razak will help to boost voter
support for the BN coalition, and should be sufficient to give the BN a marginal edge at the next
general election.

BMI Industry View 5
SWOT Analysis .... 7
Malaysia Real Estate/Construction SWOT ..... 7
Malaysia Political SWOT ........... 8
Malaysia Economic SWOT ........ 9
Malaysia Business Environment SWOT ....... 10
Market Overview 11
Market Analysis – Office . 16
Supply And Demand ..... 16
Rents And Yields .......... 16
Table: Historic Rents – 2011-2012 (MYR per m2/month) ...... 16
Table: Net Yield, 2011-2013 (%) .... 17
Table: Terms Of Rental Contract/Lease – Mid-2012 17
Industry Forecast Scenario ........... 17
Table: Forecast Rents (MYR per m2/month) 17
Table: Forecast Net Yield, 2010-2017 (%) .. 17
Market Analysis – Retail . 18
Supply And Demand ..... 18
Rents And Yields .......... 20
Table: Historic Rents – 2011-2012 (MYR per m2/month) ...... 20
Table: Net Yield, 2011-2013 (%) .... 21
Table: Terms Of Rental Contract/Lease – Mid-2012 21
Industry Forecast Scenario ........... 21
Table: Forecast Rents (MYR per m2/month) 21
Table: Forecast Net Yield, 2010-2017 (%) .. 22
Table: Malaysia Retail Sales Indicators, 2009-2016 22
Market Analysis – Industrial ....... 23
Rents And Yields .. 23
Table: Historic Rents – 2011-2012 (MYR per m2/month) ...... 23
Table: Net Yield, 2011-2013 (%) .... 23
Table: Terms Of Rental Contract/Lease – Mid-2012 23
Industry Forecast Scenario ........... 24
Table: Forecast Rents (MYR per m2/month) 24
Table: Forecast Net Yield, 2010-2017 (%) .. 24
Forecast Scenarios ......... 25
Infrastructure Report ........ 25
Table: Malaysia Construction And Infrastructure Industry Data, 2009-2016 ....... 25
Table: Malaysia Construction And Infrastructure Long-Term Forecasts, 2014-2021 ....... 26
Construction And Infrastructure Outlook ..... 27
Macroeconomic Outlook ... 30
Table: Malaysia – Economic Activity, 2011-2016 .... 32
Malaysia Real Estate Report Q1 2013
Business Monitor International Ltd Page 4
Real Estate Risk Reward Ratings ..... 33
Real Estate/Construction Risk/Reward Ratings 33
Table: Asia Pacific Real Estate Risk/Reward Ratings ........... 33
Malaysia’s Business Environment . 33
Table: BMI Business And Operation Risk Ratings ... 34
Institutions ...... 34
Table: BMI Legal Framework Rating .......... 35
Infrastructure .. 37
Table: Labour Force Quality ... 39
Market Orientation ...... 40
Table: Asia, Annual FDI Inflows .... 42
Table: Top Export Destinations (US$mn) .... 43
Table: Trade And Investment Ratings .......... 44
Operational Risk .......... 44
Competitive Landscape . 46
Company Profiles ........... 49
AZRB ... 49
IJM Corporation Berhad ......... 50
MRCB . 51
WCT Berhad ... 52
Demographic Data .......... 54
Table: Malaysia's Population By Age Group, 1990-2020 ('000) ........ 55
Table: Malaysia's Population By Age Group, 1990-2020 (% of total) ...... 56
Table: Malaysia's Key Population Ratios, 1990-2020 .......... 57
Table: Malaysia's Rural And Urban Population, 1990-2020 . 57
BMI Methodology 58
How We Generate Our Industry Forecasts ....... 58
Construction Industry .. 59
Bank Lending .. 60
Real Estate/Construction Business Environment Rating ....... 60
Table: Weighting Of Indicators 61
Sources ........... 63

Real Estate in Malaysia