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Knowledge On Industrial Space – A Real Estate Perspective

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Know-how for the next big thing in the market today

Malaysian Investment Development Authority (MIDA) acknowledged the importance of industrial growth in the country, being a key component to lift up the income of the nation. MIDA has quoted some key economic indicators with a total import of RM697.2 bil in 2016 compared to RM685.65 bil (2015). With this in mind, the manufacturing and storage industry boosted its market with 4.0-5.0% per capita income this year, in areas of electrical and electronics products, petroleum products, liquefied natural gas, machinery, appliances and more.

The fundamentals

Industrial spaces or lots have increased moderately based on the demand from multi-national companies (MNC) locally and abroad over the years and have increased the tenacity of adaptable infrastructures, storage facilities, industrial safety requirements and technologies, revolutionising and upgrading the standard proponents. Warehouses, manufacturing buildings, multi-use spaces are all considered to be industrial properties, whereby these spaces are utilised for product or goods manufacturing, storage and distribution.

A formidable company specialising in warehousing solutions, LYL Group’s director of corporate development, Adrian Lim, emphasises that LYL Group has resolved many incompetencies faced by strategically planning and meeting the apt requirements of MNCs industrial standards. As the owner of more than 3.2 million square feet of industrial / warehouse space, LYL Group have counter challenged the indifferences over the decades, to emerge stronger by building more functional warehouses to attract tenants.

 “We study the market needs, the functionalities, layout, shipping, loading bays, flooring, ceiling heights and so on. For instance, with one of our clients, hypermarket chain Mydin, its warehouse was built in U10 Shah Alam, with approximately half a million sq.ft. of warehouse space with 50,000 sq.ft.  of cold storage facilities,” added Lim.

Lim further added that warehouses are designed to facilitate changes in business growth. It must optimize the layout and configuration for the operation, space to provide adequate movement paths and material handling equipments like forklift trucks. General warehouse should be floored with concrete slabs to withstand wheel loads and abrasions, energy efficiency light coloured roofing and ceiling mounted fans for proper ventilations. These are the norm for stationery built warehouses.

What is in store?

According to the recently released Prologis Logistics Rent Index, Asia experienced a 3.0 percent industrial growth with the firm’s own holdings indicating that global industrial vacancy rates should remain low, and rents high, for the next several years. “A few long standing clienteles like DB Schenker, Linfox, H&M that are situated at U10 Shah Alam and Bukit Jelutong, and Kumon at Subang Jaya, have trusted our support on client relationship programmes, meeting their industrial standard and requirements,” said Lim.

Significantly, despite the soft market for the industrial space among business entities, Zerin Properties have phased out some challenges faced, by building industrial knowledge and fast to deliver via online strategy. “As consultants, MNCs will look out for people skills with adequate business knowledge. Some tenants may drag deals from months to a year for the parties to settle on tenancy, secure funding, paperwork and assume ownership, but leasing of these sites consumes less time,” said Windz Ng of Zerin Properties, merges and acquisitions – industrial space.

Some of the frequently asked questions would be on location, the size of the space and its accessibilities, rates and requirements like ceiling heights, power supply, loading bays, fire fighting systems, certificate of fitness and any restrictions to run the business.

Paul Poh of Zerin Properties said “Normally the term of tenancy would be two years, but the longest term can drag up to 15-30 years. Usually any internal or external modification varies between the landlord and tenant; a huge warehouse can be taken up on a project basis. Rental yields expected are 5-7% nett for this sort of spaces.”

Having the right products near the customer, means more points of distribution rather than a single point of distribution. Therefore, location and rental yield are commonly looked out for, followed by specifications. Some foreign investors prove also a challenge as the consultants need to guide them judiciously through the process till a contract is bound and fastened.

Hence, Previnthran Singhe, CEO of Zerin Properties chipped in, “As for 2017, industrial properties build ups are flat but we see confidence in the movement that will pick up. The zoning for the spaces are divided into three categories – light, medium and heavy industries. The Department of Environment (DOE) will monitor the pollutant quotient, and department of occupational safety and health Malaysia (DOSH) will control the licensing process too,”

Positive Sector

Klanggroup’s executive director, Danny Ong said ”Being involved in the manufacturing industry for a long time has inspired us to look for a niche market. Hence, we came out with an exclusive and sophisticated factory tagged with a comprehensive corporate image that was able to accommodate both local and foreign necessity.”

“In earlier times, we faced acute challenges like land acquisition, the cost of building materials and increasing labour costs. Adhering to value engineering techniques boosted Klanggroup in terms of cost reduction, value added to their clients, and inherently created a balance between initial construction costs, streamlining their maintenance cost and long-term operational cost of the development,  “Danny added.

He said that buyers were mainly looking at the property selling price, the built-up areas, land areas and the locations of the projects. The common built up for industrial spaces are all above 10,000sq.ft.  He added a technology was used in maximizing the space for users technically via construction of non-suspended slabs on soft ground, well compacted earth hard layer and crusher run layer.

Danny said “We are still optimistic towards the market in 2017. Despite the overall market performance softening, with the economy and politics among the key factors, there are still many developers launching new projects to cater to buyers’ interest.”

Industrial space business makes up a significant source of income for the nation and increases the viability of manufacturing, import and export and steady investments in future. Even Kim Jong-un quoted that, “The industrial revolution in the new century is, in essence, a scientific and technological revolution, and breaking through the forefront is a shortcut to the building of an economic giant.” This is a sentiment that has now come as a realisation to many industry players.

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