TPPA could be a catalyst for Penang industrial, office properties

KUALA LUMPUR (Sept 15): The signing of the Trans-Pacific Partnership Agreement (TPPA) could be another catalyst for export-oriented Penang to attract investors’ attention to the Pearl of Orient.

Henry Butcher Malaysia (Penang) anticipates that with the signing of TPPA, which involves 12 Pacific Rim countries including Malaysia, Penang will continue to receive a large amount of foreign direct investments (FDIs) as it will encourage import and export activities among member countries.

“However, the TPPA is expected to benefit larger international corporations while smaller companies will face stiffer competition,” said the consultancy firm in its “Penang Real Estate Market: Opportunities despite weak sentiments” research report for 2Q2016.

According to Malaysian Investment Development Authority (MIDA), Penang contributed nearly 20% of Malaysia’s overall FDI inflows in 2015, the highest among the country’s states.

Penang leads in the areas of shared services outsourcing (SSO), medical tourism and medical devices, and it recorded the highest FDIs of RM4.5 billion.

Although there were some hiccups for Penang, such as Seagate Technology and Western Digital Corp pulling out their operations in August this year which could have caused the loss of more than 3,000 jobs, there were some good news that could support market growth.

“The good news shone through recently when Bosch, a leading global supplier of technology and services announced that it will be investing RM140 million to re-model its multimedia plant in Bayan Lepas, Penang,” the report revealed.

As for Penang’s industrial properties market, there is an existing 1,490 industrial units on Penang Island comprising 855 units located at the South-West District and 635 units at the North-East District.

Future supply of industrial units at the South-West and North-East District stands at 72 units and 68 units, respectively.

Henry Butcher Penang expected a stable growth in the industrial property market, supported by strong investors’ interest and demand for such properties by the services and manufacturing sectors.

“The services and manufacturing segments contribute almost equally to Penang’s gross domestic product (GDP) at over 48%. Penang’s largest trading partners are the US, Japan and Singapore,” said the report.

Meanwhile, demand in Penang’s office market remains generally stable. However, there is a lack of suitable Grade A or even Grade B office buildings in the state.

Typically, Grade A specification includes office buildings which are brand new, have recently been redeveloped or thoroughly re-furbished within the last 15 years. They must also be highly visible.

The supply of office space as at 2Q2016 in Penang stands at 8.8 million sq ft of which 7.2 million sq ft is on Penang Island and 1.6 million sq ft in Seberang Perai.

On Penang Island, George Town has the largest supply of office space with a total of 5.7 million sq. ft. Bayan Baru, Sg Nibong and Gelugor collectively have 0.9 million sq ft of space; with the remaining 0.6 million sq ft of space being located at Green Lane, Jelutong and Tanjung Tokong.

According to Henry Butcher, the monthly rentals of prime office space on Penang Island are between RM3 to RM4 psf, depending on the location, size and facilities provided.

“It is also worth noting that more investment interest, particularly from Singapore will generate more opportunities for properties and tourism-related businesses,” according to the report.

Apart from this, Henry Buther Penang said the state is seeking to converge the manufacturing and services sectors so that it will be less dependent on electronic & electrical sector.

The consultancy firm also noted that Penang’s services segment saw the emerging economic activities of creative multimedia and global business services.

For instance, in October last year, the state launched the Penang Accelerator for Creative, Analytics & Technology (@CAT) in 2015 to promote creative and technology start-up entrepreneurship.

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