Retail, hospitality, and care prospects are good, but offices and industrial industries are lagging behind

Welfare policies have been introduced, tourism has recovered, unemployment has been mitigated, and the prospects for local retail and hotel real estate are bright.

However, the vacancy rate of offices in our country remains high, causing property trusts, which focus on office buildings, to continue to face pressure; while industrial property trusts are popular, the hot market has also caused industrial prices to soar, limiting rent rates.

As a result, Hong Leong Investment Bank research only gave the real estate trust sector a “neutral” rating.

Analysts pointed out that China's retail sector is strong, mainly recovering from the COVID-19 pandemic, and research suggests that the upward trend will be maintained.

The 13% annual salary increase for public servants, the launch of a third employee provident fund account, an improvement in the unemployment rate, and a stable salary for employees all led the study to believe that personal expenses would increase, thereby stimulating the return of consumers and the growth of retail space leasing.

However, Merdeka 118 Shopping Mall and Phase 2 of the Damansara Highland Park will both be put into operation this year, which may curb the upward space for rents in existing popular shopping malls.

On the other hand, the number of visitors to Malaysia in the first quarter of this year recorded 5.8 million; while our country's hotel operations are expected to maintain good performance in the short to medium term as the number of visitors to Malaysia grows.

The main shopping mall located in the capital Kuala Lumpur will be stimulated by travel spending based on the extension of the convenience policy that exempts Malaysian and Chinese travelers, the restoration of international flight momentum, and the expansion of the number of travelers.

Companies are investing in environmental, social and regulatory (ESG) agendas, paying more attention to the empty quality of workplaces and environmental responsibility, which is expected to allow commercial office spaces such as office buildings to continue to show a green trend.

The government solicits multinational companies to set up offices in Klang Valley; it also promotes the incubation of local start-ups, which may make the market more excited about office space.

However, including the Merdeka 118 building, at least two new office spaces have been added locally, and a further increase in the vacancy rate will put pressure on rents. The study suggests that local commercial office space will maintain the status quo.

In terms of the industrial sector, China's industrial investment is hot, and the Industrial Production Index (IPI) in April also increased by 6.1%; in addition to the “China +1” policy, the Southeast Asia region has also become a target for manufacturers to transfer operating bases.

Although optimistic about the long-term prospects of industry-related assets, analysts have noticed that the hot market has raised the prices of related industries and limited the yield of related industries.

“The lack of high-yield acquisitions limits the upward space for industrial property trusts.”

Overall, considering that China is expected to maintain an overnight policy interest rate of 3.00% for a long time, analysts believe that the weekly interest rate and interest rate difference between real estate and trusteeship currently remain 0.5 standard deviations above the 5-year average, leaving limited room for rapid expansion in this field.