KUALA LUMPUR: There are over 50 data centres in Johor that are either in the application, construction, or operational stages and more are on the horizon, according to Olive Tree Property Consultants Sdn Bhd chief executive officer, Samuel Tan.
He anticipates that this number will grow, particularly with the launch of the Forest City Special Financial Zone (SFZ), which is expected to boost foreign direct investments (FDI), alongside the Johor-Singapore Special Economic Zone (JS-SEZ).
"Despite the influx of data centres into Malaysia over the past year, many operators are still eager to establish facilities in Johor," Tan said.
He noted a growing trend where local property developers are welcoming prominent data centre operators as anchors in their industrial parks.
Tan acknowledged that challenges such as power and water supplies exist but believes that data centre development will spur the need for new renewable energy sources and water solutions.
"We expect to see more solar farms, water desalination plants, and other alternative energy sources, which will, in turn, create numerous job opportunities for locals," he told NST Property.
He further noted that industries such as high-end electrical and electronics (E&E), semiconductors, pharmaceuticals, and real estate are poised to benefit from the expansion of data centres.
"We anticipate increased demand for housing, office space, retail outlets, and worker accommodations," Tan said.
Looking ahead, Tan expects Johor's industrial sector to perform well through the remainder of the year and into 2025. "Driven by the investment activities in data centres and the E&E sectors, we foresee more companies, particularly those based in Singapore, taking advantage of initiatives like the JS-SEZ and SFZ to establish manufacturing plants in Johor."
While foreign investment is crucial, Tan emphasised the importance of small and medium enterprises (SMEs) as the backbone of the nation's economy.
"SMEs provide a steady source of job opportunities and are a permanent feature of the economy. Incentives, whether fiscal or otherwise, are essential to strengthen their position. Support in areas like digitalisation, market expansion, and global connectivity is critical, along with reskilling and upskilling their workforce to improve productivity and wages," he added.
Knight Frank Malaysia said recently that the industrial property market is expected to remain robust for the remainder of the year, driven by increased investments in data centres and the electrical and electronics (E&E) sector.
In its real estate highlights for the first half of 2024, the firm projected that the manufacturing sector will grow by 3.5 per cent, supported by the recovery of export-oriented industries and sustained domestic growth.
The report highlighted that the E&E sector, which makes up about 40 per cent of Malaysia's exports, is poised for a rebound, fuelled by global technological advancements such as digitalisation, the Internet of Things (IoT), 5G networks, and electric vehicles.
In the Klang Valley, the industrial market had a strong start to 2024, with an increase in transaction volumes and values during the first quarter.
Knight Frank emphasised rising interest from institutional investors and funds in the industrial sector, indicating a growing appetite for assets that cater to the digital economy as well as ongoing demand for manufacturing and logistics space.
The firm pointed out that yield-accretive industrial assets in established locations continue to be highly sought after as investors look to capitalise on the stable returns from this sector.
Rental rates for prime industrial space in Klang Valley are expected to remain resilient throughout 2024, underpinned by the limited availability of both existing and new supply.
Additionally, the construction of high-specification logistics facilities with sustainability features, though involving higher costs, is anticipated to drive rental rate growth in the medium term.