Industrial Market

Trade-related indicators also remained positive. Port Klang handled approximately 15.1 million TEUs in 2025 and continued to record throughput growth in 1Q2026, reflecting sustained cargo movement through Malaysia's largest gateway port. The continued expansion in container volumes indicates that manufacturing, distribution and consumption activities remained supportive despite ongoing uncertainty surrounding global trade policies and shipping networks.

Nevertheless, business sentiment became more cautious towards the end of the review period as manufacturers and logistics operators assessed the implications of evolving tariff measures, geopolitical developments and supply chain disruptions. While these factors have yet to materially affect underlying industrial demand, they are expected to influence expansion decisions and capital deployment going into the 2H2026.

Rising warehouse/logistics supply, coupled with a more cautious operating environment, is shifting market dynamics in favour of occupiers. As businesses are presented with a wider range of options, leasing and acquisition decisions are becoming increasingly selective, with greater emphasis placed on operational efficiency, scalability and specific user requirements. Similarly, recent launches of ready-built factory developments across Greater Klang Valley recorded strong pre-launch take-up, suggesting that occupiers continue to favour operationally ready facilities that reduce development risk and accelerate business deployment.

At the same time, the industrial market is witnessing the emergence of more specialised formats. The launch of ALP's RM 500 million smart cold chain facility in Shah Alam reflects continued investment in temperature-controlled logistics infrastructure, while logistics occupiers continue to adopt automation and advanced intralogistics systems to improve throughput and labour efficiency. This is evident in developments such as PTT Logistics Hub 2 at Elmina Business Park, which incorporates advanced warehousing and automation features.

While demand continues to be supported by manufacturing investment, logistics expansion and industrial upgrading initiatives across key industrial corridors, both investors and occupiers are becoming increasingly selective amid increased supply of industrial space, with capital concentrated in assets offering stronger specifications, operational efficiency and long-term relevance.

Overall, rental performance softened amid a growing supply pipeline and increased occupier choice, highlighting a more competitive leasing environment.

Johor Bahru continued to dominate the state's industrial market, accounting for the largest share of total transaction volumes (57.6%) and transaction values (79.1%) as of 1Q2026. Kulai remained the second most active district, contributing 16.6% and 11.7% of the state's total transaction volumes and values, respectively. The continued concentration of industrial activity within Johor Bahru and Kulai reflects investors' preference for established industrial corridors with mature infrastructure, proximity to Singapore and strong connectivity to major transportation networks, including highways, ports and airports, as well as the emerging growth opportunities arising from the Johor-Singapore Special Economic Zone (JS-SEZ).

The interchange is expected to improve accessibility to key industrial and logistics hubs while facilitating cross-border trade and business activities.

Meanwhile, the State Government has allocated RM 25 million for preliminary works on the East Coast Expressway Phase 4 (LPT4), a proposed 142-km highway connecting Ulu Tiram and Mersing. The project is expected to enhance accessibility and logistics efficiency along Johor's eastern coastal corridor, supporting the future expansion of industrial and economic activities while complementing the existing East Coast Expressway network.

The notable industrial transactions recorded during the review period reflect two key sources of demand: expansion by established manufacturing operators and strategic land acquisitions by developers for future industrial park developments. This reflects the continued confidence of both industrial occupiers and developers in Johor's long-term growth prospects.

This trend is particularly evident in Kulai, where a growing concentration of notable industrial transactions has been observed, including several large-scale land acquisitions exceeding RM 100 million. As industrial land supply within Johor Bahru becomes increasingly limited, Kulai is emerging as a key industrial destination, supported by its proximity to Singapore, established transport infrastructure, relatively affordable land prices, greater land availability and long-term growth potential.

Notable examples include Nexus Sedenak, a 2,940-acre innovation district by Southern Catalyst Sdn Bhd (SOCAT) with an estimated GDV of RM 15 billion, and Johor Tech Smart City, a 2,300-acre integrated development by Genting Property in Kulai with an estimated GDV of RM 80 billion. In addition, proposed industrial parks such as AutoPark and Eco Business Park 9 will further strengthen the supply pipeline by offering a mix of factories and industrial land parcels.

Growth was broad-based across most districts, led by Barat Daya which recorded a 100% increase in transaction volume. Seberang Perai Utara and Seberang Perai Selatan also registered strong growth of 69.6% and 81.8% respectively, while Timur Laut recorded a modest increase of 14.3%. Seberang Perai Tengah was the only district to record a decline, with transaction volume easing by 20% during the quarter.

The stronger transaction activity was accompanied by a more pronounced increase in transaction value, which rose by 67.8% y-o-y from RM 321.3 million to RM 539.2 million. The stronger value growth reflects a higher concentration of higher-value industrial assets. Seberang Perai Selatan and Barat Daya recorded sharp increases of 138.7% and 135% respectively, driven by large value deals in vacant plot and other industrial property.

FDI remained the primary contributor, accounting for approximately 69.6% of total approved investments with RM 3.4 billion. Although this represented a moderation from the exceptionally strong RM 6.1 billion achieved in 1Q2025, Penang continued to capture 21.4% share of the nation's total FDI.

Meanwhile, DDI spiked by 128.7% y-o-y to RM 1.5 billion, indicating growing confidence among local investors in the state's industrial and manufacturing sectors. Supported by both foreign and domestic capital, Penang ranked as the second-largest contributor to Malaysia's total capital investments, underscoring the continued attractiveness of its established industrial ecosystem.

Infrastructure works at Penang Technology Park @ Bertam reached a significant milestone in February 2026, with Phase 1 completed and Phase 2 approximately 85% complete.

Located in Seberang Perai Utara, the development is emerging as a new node within Penang's semiconductor ecosystem.

In April 2026, PILA (Penang International Logistics Aeropark) secured planning approval for its master plan, marking a key step forward in the development of Penang's logistics infrastructure. The first phase of the air cargo warehouse component is targeted for completion in 2029.

The Penang State Government has committed 10 acres of land worth about RM 40 million to develop an Automation, Test and Equipment (ATE) campus in Batu Kawan, aimed at boosting industrial transformation.

While transaction activity remained relatively healthy, market performance moderated compared to 1Q2025, largely attributable to a reduction in transactions exceeding RM 1 million. The decline in higher-value deals suggests a shift towards smaller-value transactions during the quarter, although average prices within individual bracket prices generally remained stable, indicating that underlying industrial property values have remained resilient.

Kota Kinabalu continued to dominate the state's industrial market, accounting for the largest share of both transaction volume and value despite contracting 29.2% and 57.5%, respectively. Meanwhile, Sandakan and Lahad Datu grouping registered higher transaction volumes, although the corresponding transaction values did not increase at the same pace. In contrast, Penampang / Putatan was the only locality to record growth in both transaction volume and value, while Tawau registered declines across both indicators.

Aligned with the Sabah Maju Jaya (SMJ) 2.0 blueprint, this capital injection aims to address longstanding logistics, utility and port infrastructure constraints while enhancing the state's long-term competitiveness and operational resilience.

The state is advancing three specialised industrial hubs — the Kudat Blue Economy Industrial Park, Kota Belud Industrial Park and Beaufort Industrial Park — as part of efforts to promote more inclusive economic growth beyond Kota Kinabalu.

A key component of Sabah's infrastructure investment is the RM 1.2 billion initiative to strengthen the state's power grid, including RM 765 million allocated for the Southern Link Transmission Line Project. Led by Sabah Electricity Sdn Bhd (SESB), the 330-km high-voltage transmission line will connect Sipitang, Tenom, Kalabakan and Tawau.

The RM 2 billion MADANI Submarine Cable Connection Project (SALAM) is expected to strengthen Sabah's digital infrastructure by enhancing network capacity, reliability and coverage across key coastal regions. Scheduled for completion within two to three years, the 3,190-km undersea fibre-optic network will replace the ageing Sistem Kabel Rakyat 1Malaysia (SKR1M) system.

The softer performance was primarily attributable to Miri, where transaction volume fell 38.9% from 54 to 33 transactions. In contrast, transaction activity in Kuching remained relatively stable, while Bintulu recorded a 13.6% increase in transaction volume.

Despite lower transaction activity, total transaction value rose significantly by 44.8% y-o-y, indicating continued demand for larger and higher-value industrial assets. Bintulu recorded the strongest growth in transaction value at 82.7%, followed by Kuching at 55.1%. Conversely, Miri recorded an 18.5% decline in transaction value, broadly in line with the moderation in transaction volume.

These initiatives complement broader infrastructure investments under the 12th Malaysia Plan (12MP), including the Pan Borneo Highway and Sarawak-Sabah Link Road, while the 13MP provides a further RM 183.1 million for 17 industrial park projects to support the next phase of industrial growth.

Efforts led by the Sarawak AI Centre (SAIC) are strengthening the state's capabilities in artificial intelligence, innovation and digital adoption across key industries.

Sarawak is positioning itself as a potential semiconductor manufacturing hub, supported by its strategic location, stable renewable energy supply and investment-friendly environment. The expansion of X-FAB's RM 3 billion semiconductor manufacturing facility and industry collaborations such as the partnership between BLD Group and Curtin University Malaysia further reinforce the state's ambitions.

Sarawak continues to strengthen its logistics and maritime ecosystem through strategic infrastructure investments. The ongoing development of the Miri Deep Sea Port, planned enhancements at Kuching Port and the Free Commercial Zone (FCZ) designation at Phase 1 of Samalaju Industrial Port are expected to improve cargo handling efficiency and enhance trade connectivity.