Logistics services in Malaysia dramatically growing, spurred by e-Commerce

Logistics services are fundamental to the supply chain. Although improvements in cross-border trade have dramatically improved over the past decade, the Covid-19 pandemic has been rather disruptive to this industry due to border closures and movement restrictions that interrupted domestic and external supply chains. 

This is amidst a substantial rise of e-Commerce in a Covid-19 ravaged world. As such, it is important for both the public and private sectors to ensure efficient strategies for both delivery and collection methods, says Knight Frank Malaysia.

Knight Frank capital markets executive director Allan Sim said in a press release: “Growth in the logistics sector is supported by more new requirements and space expansion from e-Commerce players as well as last-mile logistics service providers. 

“The accelerated shift from traditional retail to online order fulfillment will continue to generate strong demand to propel sustainable growth into the future.”

For Malaysia, a Southeast Asian (SEA) country dependent on exports, improving the logistics services sector to be more efficient should be a priority.

The recent RM 300 million (US$ 71 million) allocation for e-commerce campaigns under the RM15 billion Malaysian Economic and Rakyat Protection Assistance Package (PERMAI) has been a boon to the nation’s e-Commerce players.

It has helped to further expand e-Commerce activities, which will eventually lead to higher demand in logistics and warehousing space in the region — especially in strategically located centers.

According to Knight Frank, there is sustained interest in the logistics industry supported by strong demand for warehouse and distribution facilities.

Interestingly, within the manufacturing space, there seems to be more interest surfacing in the E&E sector driven by the global shortage of semiconductors as well as the 5G network roll-out, opined Sim. 

The E&E sector is amongst the top performers amongst key indices i.e. manufacturing output, export as well as manufacturing sales, among others.

Total  investments in foreign and domestic investments into the Malaysian electrical and electronics (E&E) industry doubled in 2019 compared to the previous year, according to figures from the Malaysian Investment Development Authority (MIDA), 

However, in 2020 there was consolidation in investments due to the uncertainty brought about by the Covid-19 outbreak and imposition of the first Movement Control Order. 

“Having said that, we anticipate significant interests and growth potential in the E&E space moving forward, bolstered by current global demand for sensors, semiconductor, solar, Internet of Things (IoT) products, as well as further investments into artificial intelligence (AI), smart machines and others, of the future”, added Sim.

 

Knight Frank Malaysia said that strict containment measures to curb the spread of the coronavirus such as travel restrictions have resulted in limited new foreign entries to the market. 

Amidst uncertainties, developers, investors, and local prospective buyers are adopting the wait-and-see approach and conserving cash.

The consultancy firm maintained that nonetheless, Malaysia remains an attractive destination for high-value manufacturing and global services in Asia due to its favorable investment environment with the availability of excellent infrastructure, telecommunication services, financial and banking services, supporting industries, and skilled workforce among other factors.

Knight Frank Malaysia research & consultancy executive director Judy Ong said: “As Malaysia grapples with the alarming spike of Covid-19 infections, its growth momentum, which is initially expected to continue into 2H2021 and beyond, will be derailed. The strict containment measures, currently in place, continue to severely disrupt supply chains.”

She added: “The Covid-19 crisis, however, has a silver lining for the logistics industry. With prolonged periods of lockdowns and restrictive movements, there is a structural shift towards omnichannel retailing. 

“The pandemic [has] driven an e-commerce boom; [and it] augurs well for the industrial property market due to growing warehouse space requirements to cater to the surge in last-mile delivery-cum-collection.“

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