The long awaited investment figure by the Malaysian Investment Development Authority (MIDA) showed that Foreign Direct Investment (FDI) in the manufacturing sector increased by 250.0% to RM49 billion in the first nine months of 2018, up from RM14 billion recorded in the same period last year. This significant rise is an indication of the high confidence among foreign investors in Malaysia after the peaceful power transition that began on May 9.

Figure 1: Approved Investment in Manufacturing Sector (Malaysia), 2013 – Sep 2018
Source: MIDA

The state of Johor, located at the southern end of the peninsula of Malaysia, received the highest FDI injection in the manufacturing sector, amounting to 47.6% of total investment in Malaysia in the first nine months of 2018. The industrial property market was the most sought after real asset class with total value of transactions in 3Q18 doubling to RM 634.65 million compared with the same period in 2017 at RM 332.66 million.

Figure 2: Industrial Hotspots in Malaysia
Source: JLL Malaysia

Manufacturers are not just considering government incentives and ready built infrastructure and utilities when choosing a location to set a manufacturing plant. Emphasis and priority is also being placed towards the benefits and convenience offered to workers. This has caused a shift of demand from traditional industrial parks to modern, eco-friendly industrial facilities.

To cope with market demand, industrial parks in Johor have evolved from traditional dull and monotonous factory buildings to modern and contemporary buildings that are either gated or guarded. Furthermore, land use within the parks tend to be mixed and flexible to ensure the integration of “live, work and play” elements and includes recreational parks, worker’s dormitory and other conveniences for inhabitants.

Currently Johor is the only state that has integrates these world-class facilities and features within their industrial parks.

As most manufacturers have unique building design requirements, rather than building industrial plots or ready-built factories, some developers offer built-to-suit options. Nevertheless, these developers still construct ready-built detached factories with the intention of using them as show units. Land buyers are more easily convinced as they gain confidence after looking at the quality of these show units. At the same time, the design of these ready-built factories also serves as a template for manufacturers to adjust and modify to suit their needs, thus, helping to cut down on the overall design cost and time.

Following the success story of Johor’s industrial park, developers in other parts of the country have started adopting similar concepts. Gated and guarded industrial parks were introduced in other states such as Perak, Selangor and Melaka. With the modernisation of industrial parks in Malaysia, there is an opportunity to attract further FDI into the country.

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