There’s silver lining within the global pandemic for the logistics sector.

News release by Knight Frank Malaysia: Logistics Sector: Silver Lining behind the Global Pandemic 

28 March 2020, Malaysia – The coronavirus (COVID-19) pandemic is sending global economies, including Malaysia’s, reeling. Hospitality, tourism and aviation related segments are being hit the hardest evident by cancellations of flights, tour packages and hotel bookings following international travel restrictions and lockdown of countries. The escalating number of infected cases has led to the country being placed under the Movement Control Order (MCO) until 14 April 2020. With the exception ‘Essential Services’, all other business activities have literally slowed or come to a complete halt. 

Economic Stimulus 

Prime Minister Tan Sri Muhyiddin Yassin announced the latest economic stimulus package worth RM250 billion (US$58 million) on 27 March. Together with the earlier package, a total of some RM128 billion will be allocated to the people’s welfare, RM100 billion for businesses and SMEs, and RM2 billion to strengthen the economy. 

Sarkunan Subramaniam, Managing Director, Knight Frank Malaysia applauds the rakyat-centric package which puts cash in the pockets of the deserving but feels more initiatives should be directed to sustain the economy and businesses. In addition to the automatic 6-month moratorium on all bank loans, it may be timely to waive property taxes such as quit rents and assessment for the second half of 2020. Further stamp duty should be reduced and tax reliefs given to Landlords who grant rent waivers to their tenants in order to help in the recovery process of businesses and the country’s property market. 

In the property market segment, which is already facing its own challenges in terms of supply-demand imbalance, mounting pressure will continue. Moving forward, there will be lower activity in leasing and investment in commercial office while in the retail segment, rents will be under further pressure. As for the residential market, we expect a “wait-and-see” attitude. 


Bank Negara Malaysia (BNM) reduced the Overnight Policy Rate (OPR) by 25 basis points to 2.5 per cent on 3rd March 2020, its second revision this year to provide a more accommodative monetary environment amid weaker global economic conditions and severe disruptions caused by the on-going Coronavirus (Covid-19) outbreak. 

Sarkunan Subramaniam, Managing Director, Knight Frank Malaysia, said, “As both buyers and sellers have become more vigilant amid the outbreak, a wait and see approach is prevalent as people will try to avoid showrooms and sales galleries during this critical period. In light of the current MCO, there are also disruptions to the property transaction process, such as difficulties in conducting property viewings, conducting of title searches etc. 

“In addition, with potential of more job layoffs due to the challenging business environment, we foresee an increase in non-performing loans that will conclusively lead to more auctions in the market.” added Sarkunan

The central bank’s announcement on the automatic moratorium on loan repayments for small and medium enterprises (SMEs) and individuals to relieve the burden on businesses and households affected by the Covid-19 outbreak may, however, help to cushion the impact in the short term. 

Industrial / Logistics 

Allan Sim, Executive Director of Capital Markets, Knight Frank Malaysia, said, “Geographical diversification strategies will be key, moving past the current state of outbreak. 

In a domestic context, distribution hubs in Klang Valley are traditionally used by logistic players to serve nationwide deliveries. The current disruptions to the supply chain may give rise to potential decentralisation of logistics players into multiple smaller satellite distribution hubs in the northern and southern regions of Malaysia as well as in Sabah and Sarawak to support local distribution channels. 

Similarly, on a global front, manufacturers may also start locating last mile assembly plants in multiple countries / regions in order to mitigate any geographical risks that may disrupt supply chains.” 

Sim is also of the opinion that the current imposition of MCO will incentivise many of the late adopters of e-commerce to try out online shopping as a means to purchase groceries or essential items. This will further accelerate the growth of last mile deliveries fulfilment centres and logistics services as a result. Given the above, the industrial property market outlook may be bright with additional demand for warehouse space and factories arising from the decentralisation strategies. 

“Meanwhile, weakened air cargo demand arising from earlier trade tensions may see some positive momentum given the increasing need for quick turnaround distributions. This may be an area to be further explored by industry players”, added Sim


The COVID-19 pandemic has forced companies to limit or halt physical operations, pushing them to work more flexibly and remotely. Both local and multinational companies may delay or put on hold their real estate decisions, resulting in lower level of leasing activity. 

Teh Young Khean, Executive Director of Corporate Services, Knight Frank Malaysia, said, “Business sentiment is at its lowest level, with many operations severely impacted by the outbreak. The sense of uncertainty will lead to slower demand as businesses and occupiers will likely continue to postpone major expansion / relocation decisions. 

“In the immediate term preceding the lifting of the current MCO, co-working or flexible space may be less popular as there will be reduced desire for clients/members to congregate and interact face to face in one location. Revenue derived from memberships fees and events may be affected during this period although e-events will continue to progress. 

“However, once confidence level improves with businesses back to work as usual, co-working or flexible space may be a good option for new occupier(s) and those looking to expand to navigate in the near term before committing to longer term plan.” 


One of the main concerns of enforcing the MCO is the repercussions on social well-being (physical and mental) and economic performance of the country. 

Malaysian retailers, especially those located at tourist zones, have been experiencing sales decline at their outlets at the onset of the COVID-19 outbreak. 

Ben Ooi, Associate Director of Retail Consultancy & Leasing, Knight Frank Malaysia, said, “With the rakyat staying at home during the current extended MCO, retail and entertainment outlets with the exception of those providing essential goods / services, have no sales as they are not allowed to operate. While retail spending on non-essential goods are not the focus at this moment, demand for essential goods is increasing. Online shopping and delivery services are gaining popularity. After the MCO, occupancy of malls will be under pressure as some retail outlets may be forced to close due to the strain on their cashflow and unsustainable businesses. 

“Landlords and retailers have to step up measures during this MCO to educate the public when doing their grocery shopping, such as providing hand sanitiser and marking zoning on where to stand in the lifts. 

“Landlords are also stepping up during the MCO to assist retailers by introducing relief measures, for example rent free package for non-F&B related retailers and rental rebates for retailers.” 

Commercial Investment 

During economic instability, real estate transaction volumes typically moderate. Profit recycling process could be interrupted by the effect of the COVID-19 outbreak, as institutional investors move more cautiously during uncertain times. 

James Buckley, Executive Director of Capital Markets, Knight Frank Malaysia, said, “With the reduced leasing and investment activity, commercial office and retail rents will be further under-pressure. In the short term, investment transactions will be limited as viewings are not happening. In comparison to other cities, feedback we often receive from overseas investors is that real estate asking prices do not reflect the actual value given the country’s perceived risk profile and higher returns can be achieved elsewhere. There will be a large gap in the expectation between sellers and buyers, yields are bound to increase as values come under pressure. Genuine, motivated sellers will consider reducing their price, pushing yields higher. Domestic investors should also consider the benefit of investing some of their capital in overseas real estate markets which will provide diversification in real estate returns and currency.” 

Hospitalism / Tourism 

The impact on the hospitality / tourism and aviation related sector have been immediately felt since the outbreak of COVID-19 due to travel restrictions, events cancellations and individuals’ reticence to travel. 

Sarkunan Subramaniam, Managing Director, Knight Frank Malaysia, said, “According to Tourism Economics, global travel is expected to drop by 10 to 18%, which is the biggest year-on-year drop amid the outbreak of COVID-19. Hence the hospitality sector will face financial pressure with lower returns. However, cheaper travel and accommodation cost may motivate and drive the sector once the COVID- 19 pandemic is contained, serving as a slice of positivity in this sector.” 

— end news release —

Please LIKE FB page or Sign Up for free to get daily updates about the property market. Else, follow me on Twitter here.

Next suggested article: A RM250billion stimulus for economy Malaysia against COVID-19


Leave a Reply

Your email address will not be published. Required fields are marked *