KUALA LUMPUR, 6 JANUARY 2024 – Knight Frank Malaysia has released the Malaysia Commercial Real Estate Investment Sentiment Survey (CREISS) 2025, shedding light on pivotal trends and opportunities in the nation’s commercial real estate market. Based on insights gathered from industry leaders and stakeholders, the report provides a comprehensive outlook for 2025, highlighting resilience, growth potential, and the evolving role of ESG (Environmental, Social, and Governance) considerations.
Ranking of real estate investment sectors based on growth in 2024
As Malaysia’s commercial property landscape evolves, data centres and industrial/logistics emerge as the most resilient and promising sectors for 2025. These sectors are buoyed by increasing demand for cloud computing, e-commerce growth, and Malaysia’s position as a regional trade hub. The survey predicts these sub-sectors will outperform, with notable contributions from Johor’s burgeoning data centre developments and the continued expansion of Klang Valley’s industrial landscape. A brighter outlook is projected for the retail and hospitality sub-sectors, bolstered by rising consumer spending and tourism recovery. In 2024, Malaysia welcomed 22.5 million tourists as of November – a clear indication of growth momentum for 2025. Industry players foresee improved rental and occupancy rates in these sectors, underscoring their recovery potential.
Despite the central bank maintaining the OPR at 3.00% throughout 2024, key challenges persisted, including rising interest rates, inflationary pressures, financing difficulties, and increasing construction costs driven by geopolitical tensions and supply chain disruptions. Rising building vacancy rates due to hybrid work trends and a supply-demand gap, along with fiscal challenges, further strained the commercial real estate landscape. The retail sector also faced declining sales due to brand boycotts, while risks anticipated for 2025, such as rising costs, tenant demand shifts, and regulatory changes, are expected to exacerbate concerns.
Adjustments on commercial real estate portfolio in 2024
In 2024, 48% of respondents expanded their portfolios in the industrial/logistics sector, driven by government policies like New Industrial Master Plan 2030 (NIMP 2030) and National Energy Transition Roadmap (NETR), while 39% maintained theirs. Rail developments like MRT and LRT spurred transit-oriented growth, with 44% expanding portfolios. In hospitality and office sectors, most maintained portfolios (77% and 57%), though 27% downsized office assets. Retail saw mixed activity: 46% maintained, 36% expanded, 11% downsized, and 7% exited, with sales projected to grow 3.9% amid economic resilience and a strong labour market.
CREISS 2025 highlights the growing importance of ESG in real estate, with a focus on energy efficiency, green certifications, and sustainable practices as businesses adapt to regulatory changes and investor demands. The introduction of carbon tax policies in Budget 2025 emphasizes the need for ESG-aligned investments. About 34% of respondents say their organizations have fully embraced ESG, while 66% have partially integrated it, focusing on key issues in their decision-making and reporting.
The importance of ESG in investment decisions making
Key ESG Priorities in 2025: Ranked by Importance
“ESG is no longer a choice but a necessity for real estate players to remain competitive in a rapidly changing landscape. This sentiment is echoed by 91% of our survey respondents who recognize ESG’s critical role in their investment strategies,” said Keith Ooi, Group Managing Director, Knight Frank Malaysia.
Amy Wong, Executive Director of Research & Consultancy at Knight Frank Malaysia, added, “The findings of the CREISS Report 2025 underline a transformative period for Malaysia’s commercial real estate market. While challenges persist, the opportunities presented by sectors such as data centres, industrial/logistics, and ESG-aligned developments are significant. These insights will undoubtedly serve as a valuable resource for industry stakeholders.”
The most resilient commercial real estate sub-sectors next year
The report identifies Klang Valley and Johor are set to lead commercial real estate investments in 2025. Klang Valley remains Malaysia’s central business and economic hub, while Johor, strategically located near Singapore, continues to draw interest in data centres and industrial/logistics. The Johor-Singapore Special Economic Zone (JS-SEZ) and increasing land acquisitions for data centre projects highlight Johor’s growing appeal.
Factors likely to influence the commercial real estate market performance in 2025
Despite challenges like rising construction costs and a tenant-driven market, 91% of respondents remain optimistic about Malaysia’s commercial real estate market in 2025, with 34% planning to increase their investments. Nevertheless, 75% view the FDI outlook as favourable, supported by RM254.7 billion in approved investments during 9M2024, a 10.7% increase from 2023. Malaysia’s economy shows positive momentum with 5.2% GDP growth and a 3.3% unemployment rate during the same period.
CREISS 2025 serves as a strategic tool for stakeholders, offering actionable intelligence to navigate opportunities and challenges in the year ahead. Knight Frank Malaysia will soon release the Real Estate Highlights 2H2024 (REH 2H2024) publication, which will offer a comprehensive half-year review of the Malaysian property market to complement the forward-looking insights of CREISS 2025.
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“Our CREISS 2025 emphasizes our dedication to equipping stakeholders with the insights they need to thrive in a dynamic market. By bridging forward-looking trends with actionable intelligence, we aim to empower informed decision-making and drive sustainable growth in Malaysia’s commercial real estate landscape,” added Ooi.
Download the report here: https://kf-my.com/CREISS-FULLREPORT-2025
About Knight Frank Malaysia
Knight Frank Malaysia offers high-quality professional advice and solutions across a comprehensive portfolio of property services and is registered with the BOVAEA since its establishment two decades ago. The brand has embraced a growth strategy based on “Partners in Property” and remains firmly focused on the future. The Company is licensed to undertake property, valuations/consultancy, estate agency, and property management and is also on the panel of all leading banks and financial institutions. Having a strong presence in Malaysia with its headquarters in Kuala Lumpur as well as branches in Penang, Johor Bahru, Kota Kinabalu and Miri, the Company will continue to engage with stakeholders to help shape global success in real estate markets in the years to come.
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