KUALA LUMPUR, July 17 (Bernama) -- Malaysia’s real estate market recorded steady growth across key sectors in the first half of 2025 (1H 2025), supported by strong data centre investments, infrastructure development and resilient domestic demand, according to Knight Frank Malaysia.
In its Real Estate Highlights for 1H2025 (REH 1H2025), which covers industrial, office, retail, hospitality, and residential segments, Knight Frank Malaysia highlighted that the market has been showing signs of stability despite global uncertainties.
Industrial Sector
According to the report, the industrial sector continued to expand, driven by data centre investments totalling RM163.6 billion in 2024 and supported by strategic infrastructure such as the East Coast Rail Link (ECRL), the Johor-Singapore Special Economic Zone (JS-SEZ), and Port Klang upgrades.
Johor, Penang and Sabah have emerged as industrial growth engines, while Sarawak is seeing increasing focus on green technology parks.
Klang Valley is expected to see 4.2 million square feet of new warehouse supply by 2H2025, reshaping availability and pricing dynamics.
Office Sector
Office markets in Klang Valley, Johor and Penang remained steady, with stable or improving occupancy rates and rental demand.
Klang Valley is projected to add over two million square feet of new office space in 2025.
In Johor Bahru, office rents rose between RM0.10 and RM0.40 per square foot in prime areas, supported by newer supply and steady absorption.
Penang's office market held steady with minor occupancy improvements across Penang island and Seberang Perai.
In Sabah and Sarawak, demand remained firm, underpinned by consistent tenant retention and infrastructure-driven confidence.
Retail Sector
Retail performance was steady nationwide, with Klang Valley expecting three million square feet of new retail space in 2H2025.
Malls such as Sunway Pyramid and IOI City Mall are undergoing green and tech-focused upgrades to stay competitive.
Retail occupancy in Johor Bahru stood at 72.4 per cent in the first quarter of 2025 (1Q2025), while Penang saw a slight dip to 72.1 per cent (4Q2024: 72.3 per cent), with activity balanced between island and mainland locations.
Kota Kinabalu's retail occupancy edged up to 79.2 per cent (4Q2024: 78.9 per cent), supported by lifestyle-led and experiential retail offerings.
Hospitality Sector
The hospitality sector continued its recovery, recording more than 25 million visitors and RM102.2 billion in receipts in 2024. Kuala Lumpur holds 16.9 per cent of the country’s total hotel room supply, and steady gains in occupancy and room rates were seen across key destinations.
Sabah surpassed its 2024 tourism target with 3.1 million arrivals, and Sarawak exceeded its own with 4.8 million visitors, driven by events, improved connectivity and strategic branding.
Residential Sector
The residential sector was mixed. Kuala Lumpur recorded a 3.2 per cent year-on-year increase in home prices in 1Q2025, but saw an 8.7 per cent drop in transactions, pointing to a possible oversupply in high-rise units.
Johor’s residential market grew stronger with a 14 per cent jump in transaction value in 1Q2025, while Penang saw slight dips in high-rise transaction volume and values.
Outlook and Caution
Knight Frank Malaysia group managing director, Keith Ooi, said Malaysia’s real estate market continues to demonstrate resilience despite global headwinds and increasing policy complexity.
“What we are seeing now is a more discerning market – investors and occupiers are sharpening their focus on long-term fundamentals, especially assets that can deliver sustainability, efficiency and adaptability,” he said.
Meanwhile, its executive director of Research and Consultancy, Amy Wong, said the REH 1H2025 report highlights emerging opportunities in both established and developing regions across Malaysia.
“Infrastructure projects like the ECRL and JS-SEZ are lifting regional prospects, while the rise of environmental, social, and governance (ESG) standards, smart retailing, and demand for lifestyle-centric developments are reshaping the market landscape,” she said.
Despite the positive outlook, the report also cautioned that certain challenges remain, particularly in the industrial and office segments, where infrastructure limitations, electricity costs, and talent shortages are influencing investment decisions.
“The office market may see more measured leasing activity as businesses contend with operational cost pressures and upcoming tax changes.
“In retail, while demand is underpinned by wage recovery and tourism, consumer sentiment may soften amid rising costs and fewer festive catalysts,” it said.
It added that the residential sector is expected to remain resilient, but developers and investors must stay agile in navigating shifting market conditions and global headwinds.
--BERNAMA
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