Malaysia has a great opportunity to leverage its mature digital infrastructure and skilled workforce to become the focal point for regional headquarters of multinational companies (MNCs) and high-skilled services and manufacturing.
Strategic advisory firm, Bower Group Asia associate director Darryl Tan said that while Singapore serves as the regional headquarters for many MNCs, Malaysia acts as a high-skilled service and manufacturing hub for these companies and Indonesia and Vietnam focus more on the manufacturing side of the value chain.
Tan emphasised that many of the strategies outlined by Malaysian Prime Minister Datuk Seri Anwar Ibrahim are heavily supportive of the vision to leverage the advantages of each member country.
“Together, they can make ASEAN a competitive hub,” he said, adding that the strategies include fostering digital adoption at every level of the supply chain, increasing regulatory cooperation as well as increasing logistical linkages to enable smoother transactions of goods and expertise across borders.
According to him, Putrajaya should also leverage its significant investments in renewable energy to attract companies that want to set up environmentally sustainable manufacturing plants in the region.
He highlighted that Malaysia should take advantage of its regulatory and policymaking experience – such as in the digital and energy sectors – and share this knowledge to foster stronger regulatory cohesiveness across the region.
“Deeper economic integration within the region will allow ASEAN to position itself as a hub for businesses at every level of the supply chain,” he said, adding that the country would benefit from the overall tech boost, as Malaysia is a major exporter of semiconductors and electrical and electronics (E&E) products.
Tan believes that there will be stable growth next year, with the economy expanding by 4.5-5.5%, supported by the continued demand for E&E goods, as MNCs invest heavily in new technologies, particularly artificial intelligence (AI).
Additionally, the influx of MNCs seeking regional headquarters in Kuala Lumpur (KL) is further contributing to a more competitive office landscape.
On this, Knight Frank Malaysia executive director of office strategy and solutions Teh Young Khean said that the global property consultancy remained positive on the office market outlook, with notable MNCs expanding and setting up business in Malaysia.
This, Teh said, is attributed to the trend of KL’s competitive real estate and welcoming business environment.
“Despite higher vacancy rates among the Asia-Pacific region, KL city continues to show steady signs of improved occupancy rate and rental rates of prime grade buildings from quarter-to-quarter (QoQ),” he pointed out.
The Knight Frank’s Asia-Pacific Prime Office Rental Index for the third quarter of 2024 (3Q24) revealed that prime office rents in Asia-Pacific are stabilizing, falling 0.1% QoQ, suggesting a potential bottoming out of the market.
It also noted that the trend is supported by growth in the Indian markets, which exhibit strong and sustained demand from offshoring operations and domestic businesses.
According to the report, 16 out of 23 monitored cities reported stable or increasing rents year-on-year (YoY), up from 15 in 2Q24, with rents declining 2.5% YoY, which is an improvement from 2.8% drop observed in 2Q24.
Despite this, global head of occupier strategy and solutions Tim Armstrong noted the global economic uncertainties have led to more cautious capital expenditure strategies among occupiers, favouring renewals and consolidating office footprints.
“When relocations do occur, companies are opting for smaller, higher-density spaces, aligning with cost mitigation needs and the growing acceptance of hybrid work models.
“While the business sentiment may improve as the US Federal Reserve (Fed) eases monetary policy, demand will continue to be tempered by prudent spending and workplace mitigation needs and the growing acceptance of hybrid work models.
“While the business sentiment may improve as the Fed eases monetary policy, demand will continue to be tempered by prudent spending and workplace strategies focused on maximizing space utilisation,” he said.
However, he added that the region’s development peak subsidies, any significant uptick in leasing activity could rapidly tighten the availability of prime spaces.
He also said that the scenario may accelerate the flight-to-quality trend as tenants seek to upgrade their portfolios in a potentially more competitive market.
