Commercial and industrial property outlook in JS-SEZ

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The Johor-Singapore Special Economic Zone (JS-SEZ) is expected to have a major transformative impact on the commercial and industrial property markets in Johor. Understanding these potential effects will help investors to capitalize on emerging opportunities. Here’s a detailed analysis of how the JS-SEZ could influence the commercial and industrial property markets:

1. Growth in office, industrial and logistics properties

The JS-SEZ is likely to attract multinational corporations (MNCs), Singapore-based companies, and startups looking to expand or relocate due to lower operational costs compared to Singapore. It is also expected to boost manufacturing and trade activities, increasing demand for industrial properties, including factories, warehouses, and logistics hubs.

The rise of e-commerce and cross-border trade between Malaysia and Singapore could further fuel demand for logistics and distribution centres. Smart warehousing may be developed reinforcing Johor as the regional logistics and distribution hub of the region.

2. Retail and hospitality sector expansion

With an influx of workers, expatriates, and visitors, demand for retail spaces, including shopping malls, convenience stores, and F&B outlets, is likely to grow. Areas with high foot traffic near the JS-SEZ will see increased interest from retailers and shoppers. With a wide range of cuisine due to our multiple cultures, more F&B outlets will be opened making Johor a Food Paradise. The average occupancy rate of retail malls in Johor is about 72%. Those popular ones are near to 100%.

The JS-SEZ could lead to a surge in business travel and tourism, driving demand for hotels, serviced apartments, and short-term accommodations. Driving the hospitality sector is the increased of tourists coming into Johor. The strong Singapore dollars is an important factor. Our proximity to Singapore, better connectivity and more choices for vacation are positive factors. Already hospitals in Johor like those belonging to KPJ, Regency Specialist Hospital, and Asia Columbia Hospital are reportedly doing well. Their clients are not only from Malaysia but are from Singapore and Indonesia.

There are many forms of tourism being promoted here including medical, property, nature, food, cultural, education and other forms of tourisms.

3. Rising property values and rental yields

Commercial and industrial properties in and around the JS-SEZ are likely to experience capital appreciation due to increased demand and limited supply. We have seen rentals of Grade A purpose-built offices increased to RM5.50 per sq ft per month from the previous level of RM3.00 per sq ft. Factory spaces are commanding RM1.70 per sq ft from RM1.10 per sq ft previously.

The tables below show the total transaction volume and value of industrial properties in Johor.

Landlords may benefit from higher rental yields, especially for office spaces, retail units, and industrial properties.

4. Infrastructure development

Enhanced transportation links, such as upgraded roads, public transportation, and new rail connections between Johor and Singapore, will make commercial and industrial properties more accessible and attractive. Apart from the Johor Bahru-Singapore Rapid Transit System (RTS) Link Project, the Elevated ART is expected to roll out soon to disperse the passengers arriving from the RTS. The high volume of 10,000 passengers per hour one way is a challenge. We cannot dismiss the possibility of the LRT system as another mode of transportation in the longer run. In the meantime, the Double Tracked Electrified Rail System from Gemas to Segamat has just started operating. It will soon be extended to Johor Bahru by August 2025.

With new highways and transportation hubs, more Transit Oriented Developments (TOD) will be developed. The first announced was the joint venture between MRTCorp and the Sunway Group at the RTS Project.

5. Foreign investment and joint ventures

Singaporean companies and investors are likely to play a significant role in the development of the JS-SEZ, leading to joint ventures and partnerships in Enhanced transportation links, such as upgraded roads, public transportation, and new rail connections between Johor and Singapore, will make commercial and industrial properties more accessible and attractive. Apart from the RTS Project, the Elevated ART is expected to roll out soon to disperse the passengers arriving from the RTS. The high volume of 10,000 passengers per hour one way is a challenge. We cannot dismiss the possibility of the LRT system as another mode of transportation in the longer run. In the meantime, the Double Tracked Electrified Rail System from Gemas to Segamat has just started operating. It will soon be extended to Johor Bahru by August 2025.

With new highways and transportation hubs, more Transit Oriented Developments (TOD) will be developed. The first announced was the JV between MRTCorp and the Sunway Group at the RTS Project.

6. Long-term economic growth

The JS-SEZ will deepen economic integration between Johor and Singapore, creating a dynamic business environment that supports long-term growth in the commercial property market.

The JS-SEZ is expected to generate significant job opportunities, further driving demand for commercial spaces as businesses expand to accommodate new employees.

Recommendations for investors:

Identify and target prime locations within the JS-SEZ that are likely to experience the highest demand for commercial and industrial properties.

Investors must monitor government policies and incentives related to the JS-SEZ.

Investors need to diversify their investments across different types of commercial properties (e.g., office, retail, industrial) to mitigate risks and capitalize on various opportunities.

Build relationships with businesses, investors, professionals, and developers looking to establish a presence in the JS-SEZ.

Conclusion

The JS-SEZ is poised to significantly boost the commercial property market in Johor by driving demand for office spaces, industrial properties, retail outlets, and hospitality facilities. While this presents lucrative attractive opportunities for investors and businesses, it will also require careful navigation of market dynamics, competition, and regulatory changes. As investors, staying informed and proactive will be key to maximizing the benefits of this economic transformation.

Disclaimer

The article contained in this page are for general information only. This article and any material contained in this page do not constitute an offer, recommendation, solicitation to take up any products, enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments offered by the Bank. The article have not been prepared for any particular person or class of persons and does not constitute and should not be construed as investment advice nor an investment recommendation. It has been prepared without regard to the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser on the suitability of a product or an investment for you, taking into account these factors before making a commitment to invest in an investment or to take up any products offered by the Bank.

All information is correct at the time of publishing.