KUALA LUMPUR: Knight Frank Malaysia has released its Malaysia Commercial Real Estate Investment Sentiment Survey (CREISS) 2025, highlighting pivotal trends, growth potential, and the evolving significance of Environmental, Social, and Governance (ESG) factors in the nation’s commercial real estate sector.
The report sheds light on key market drivers and opportunities for 2025, signaling resilience despite some challenges. According to insights from industry leaders, data centres and industrial/logistics sectors are expected to perform strongly in 2025, supported by the growing demand for cloud computing, the rise of e-commerce, and Malaysia’s strategic position as a regional trade hub. The Johor region, in particular, is seeing significant growth in data centre developments, while the Klang Valley continues to expand its industrial landscape.
The retail and hospitality sectors are also projected to show improvement in 2025. With Malaysia welcoming 22.5 million tourists in 2024 (as of November), this growth trend is expected to support a recovery in rental and occupancy rates. The surge in consumer spending and the tourism sector’s recovery further bolster this optimism.
However, the sector faced some challenges in 2024, including rising interest rates, inflationary pressures, financing difficulties, and construction cost hikes due to geopolitical tensions and supply chain disruptions. Furthermore, hybrid work trends led to rising vacancy rates in office spaces, and the retail sector faced declining sales due to brand boycotts.
The report also addresses the growing importance of ESG in the commercial real estate sector. Energy efficiency, green certifications, and sustainability are becoming essential for businesses aiming to remain competitive. Approximately 91% of survey respondents recognized ESG’s critical role in investment strategies. Furthermore, the introduction of carbon tax policies in Budget 2025 is expected to accelerate the adoption of ESG-aligned investments.
Notably, Klang Valley and Johor are forecasted to lead investment activities in 2025. Klang Valley remains Malaysia’s economic and commercial hub, while Johor, positioned near Singapore, attracts attention for its data centre and industrial/logistics developments. Key developments, including the Johor-Singapore Special Economic Zone (JS-SEZ), underscore Johor’s growing appeal.
Despite ongoing challenges like rising construction costs, tenant-driven markets, and regulatory changes, there remains strong optimism about the market. 91% of respondents are optimistic about Malaysia’s commercial real estate market, with 34% planning to increase investments in 2025. The positive FDI outlook and Malaysia’s GDP growth of 5.2% in 2024 further fuel this optimism.
The CREISS 2025 survey serves as a strategic tool for stakeholders, offering actionable insights to navigate both opportunities and challenges in the year ahead. Knight Frank Malaysia will release its Real Estate Highlights 2H2024 publication soon, complementing this forward-looking survey with a comprehensive review of the market.
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