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JOHOR’s ability to draw significant foreign direct investments and establish a data centre ecosystem is enhancing its appeal to global players.

This presents numerous opportunities for the Malaysian state in the industrial, hospitality, office and residential sectors.

In a report by Knight Frank Malaysia released on Monday (Jan 13), the property consultancy noted that with Johor’s positioning as a hub for sustainable and high-tech industries, its industrial property sector is “poised for sustained growth”.

During the first nine months of 2024 (9M 2024), the transaction volume of industrial properties in Johor saw a slight year-on-year decline of 6.1 per cent to 642 units.

However, as industrial properties of higher value changed hands, this resulted in a 44.6 per cent spike in transaction value for 9M 2024, compared to the same period in the prior year.

The report highlighted that strategic locations such as Kulai, a town in Johor, are “emerging as investment hotspots”, driven by their focus on high-value industries, including logistics, clean technology and advanced manufacturing.

“Infrastructure expansions, such as port enhancements and the development of advanced industrial parks, are further solidifying Johor’s position as a regional trade and investment hub.”

Addressing resource challenges, such as high water and energy consumption, through public and private sector collaboration, will also further enhance the state’s appeal to investors.

Meanwhile, heightened industry awareness of environmental, social and governance initiatives is driving a gradual shift towards green industrial parks, with Johor seeing a growing supply of such parks that integrate renewable energy and technological advancements.

Hospitality

Over in Johor’s hospitality sector, the future looks bright, with “sustained growth and increasing regional popularity expected in the years to come”.

According to the report, as at the third quarter (Q3) of 2024, the industry comprised 488 hotels offering a total of 31,971 rooms, a year-on-year increase of 0.8 per cent and 2.5 per cent respectively.

With nine hotels under construction and eight having received planning approval, an additional 5,478 rooms are set to be delivered.

The tourism sector is experiencing a strong recovery post-pandemic, as seen in two indicators. The average occupancy rate for three to five-star hotels in Johor recorded an improvement from 61.4 per cent in Q3 2023 to 66.6 per cent in Q3 2024.

Concurrently, the average daily rate for selected three to five-star hotels in the state saw a robust year-on-year growth of 19.5 per cent to RM267 (S$81.10) per night.

With rapid growth in the industrial sector and a strong recovery in the hospitality industry, Amy Wong, executive director of research and consultancy at Knight Frank Malaysia, said that there are “plenty of opportunities for investors and stakeholders”.

Looking to the future, she noted that a strong focus on sustainability will be crucial for strategic investments.

Office

In the office space, Johor is “gaining traction among tenants for Grade A office spaces”, due to lower rental rates, reduced operational costs, as well as potential incentives from the Johor-Singapore Special Economic Zone (JS-SEZ).

The report noted that as at H2 2024, the supply of selected office spaces in Johor totalled about 7.49 million square feet, reflecting a year-on-year increase of 15.6 per cent.

Following the increase in supply, the average occupancy rate declined slightly to 48.1 per cent in H2 2024, a year-on-year decrease of 2.2 per cent.

However, average asking rental rates in the state increased during the review period, partly driven by the influx of new Grade A office buildings.

The cost-effectiveness of Grade A purpose-built office spaces in Johor has contributed to it seeing “growing interest” from corporate and multinational companies, particularly those based in Singapore.

As demand increases, Knight Frank Malaysia posits that older office buildings are likely to be refurbished or repurposed to meet the need for modern workspaces.

Residential

As for Johor’s residential sector, the outlook for the high-rise market remains optimistic, with numerous project launches in the pipeline, especially near the new Johor-Singapore Rapid Transit System (RTS) Link station.

For 9M 2024, transactions of condominiums and apartments have seen a year-on-year increase of 13.6 per cent in volume and 23.2 per cent in value.

In the same period, the serviced-apartment category recorded exceptional growth, with transacted volume and value surging by 80.3 per cent and 100.2 per cent respectively.

While land scarcity in the city centre might limit future projects, Knight Frank Malaysia expects increased activity in fringe areas, particularly in Iskandar Puteri, where positive market sentiments are fuelling new developments.