KUALA LUMPUR: The ringgit depreciation and escalating business costs in Singapore have made it more attractive for foreign businesses to operate out of Malaysia than its southern neighbour, industry specialists said.
Seven in 10 businesses in Singapore are considering moving employees outside of Singapore, according to a poll by the European Chamber of Commerce there.
Datuk Stewart LaBrooy, executive chairman of AREA Management Sdn Bhd, said the ringgit has effectively given foreign investors a discount with a significant upside when the currency appreciates in the future.
Juwai IQI co-founder and group chief executive officer Kashif Ansari said the weakening ringgit is part of the appeal of Malaysian properties that have been luring foreign investors back into the market.
Malaysia is also gaining from the boom in commodities, increased exports, robust foreign direct investment, and the improvement in domestic demand, Kashif added.
CBRE|WTW chairman Foo Gee Jen said that there is a lot of optimism about the property market this year.
Along with an increase in transaction momentum, confidence levels have also been rising, Foo added.
LaBrooy told the New Straits Times that the escalating expenses, encompassing factors such as labour, rental rates, and operational overheads, as well as stringent environmental, social, and governance (ESG) criteria, have necessitated careful cost management and strategic decision-making among businesses operating in the region.
Moreover, residential rent increases exceeding 40 per cent in Singapore as reported recently, inflationary pressures and escalating costs associated with travel and shipping have emerged as contributing factors to the overall rising costs faced by businesses there.
“The business environment in Singapore is shaped by strict ESG criteria, rising business costs, the depreciation of the ringgit, and a combination of factors such as substantial residential rent increases and general cost inflation,” he said.
LaBrooy said multinational corporations are increasingly interested in purchasing industrial properties, especially data centres in Malaysia.
He said the availability of large contiguous tracts of land being made available by Malaysian plantation companies as they move to monetise part of their assets by converting their usage from agricultural to industrial is also attracting new investors.
He added that with the newly-discovered availability of industrial land, the Malaysian government has put in place a number of incentives to lure high-tech and high-value firms to locate their operations there.
“These incentives serve as a catalyst for attracting prominent local developers and government-linked companies to move from focusing on residential development to investing in Malaysia’s industrial property sector. It is also attracting MNCs to invest in Malaysia’s industrial property sector, driving more business out of Singapore and into the country.
“What is most interesting to note is that despite all these businesses choosing to relocate to Malaysia, they still have their companies registered in Singapore,” he said.
LaBrooy said the China plus one strategy, where global manufacturers are diversifying their supply chain by moving part of their production from China to Asean, is looking to invest in large-scale industrial parks to house their factories.
He said the Malaysian market is now witnessing large-scale MNCs actively seeking to acquire land and construct customised industrial properties tailored to their specific needs.
This strategic move allows them to create bespoke facilities that align with their operational requirements and enhance their overall efficiency and productivity, he said.
“In summary, the interplay of these factors, such as currency devaluation, the conversion potential of agricultural land, government incentives, and the interest of major MNCs, has contributed to the current landscape of the Malaysian industrial property market.
“These dynamics provide significant opportunities for investors and developers alike, driving the growth and diversification of this sector to a scale never witnessed before,” he said.
Juwai IQI co-founder and group chief executive officer Kashif Ansari said the weakening ringgit is part of the appeal of Malaysian property that has been luring foreign investors back into the market.
Malaysia is also gaining from the boom in commodities, increased exports, robust foreign direct investment, and the improvement in domestic demand, he said.
CBRE|WTW chairman Foo Gee Jen said that there is a lot of optimism about the property market this year.
He said that along with an increase in transaction momentum, confidence levels have also been rising.