JOHOR BARU: Older factories with ready infrastructure could offer investors better returns and faster rental income as Johor’s industrial sector expands.
JS-SEZ Monitor founder Nasser Ismail said selected older industrial properties could be attractive alternatives to newer facilities, provided their electricity and water capacity met prospective tenants’ needs.
“There is a distinct and widening valuation between the older secondary industrial stock and modern, purpose-built facilities,” he said.
He said investors should look beyond acquisition prices, as refurbishment, utility upgrades and the time needed to prepare a factory for occupation could significantly affect overall costs.
A cheaper property requiring major electrical or building upgrades could ultimately cost more than a newer facility with a higher asking price.
The consideration is increasingly relevant amid Johor’s industrial expansion, including the proposed RM12 billion investment potential identified for Nexus Sedenak under Budget 2027 and the RM15 billion gross development value announced by Southern Catalyst Sdn Bhd.
Nasser said electricity and water availability should be among investors’ key considerations, particularly as growing industrial activity and data centre expansion place greater demands on infrastructure.
He cautioned that data centres and conventional factories generally operate on different electricity distribution requirements, with most factories using 11kV or 33kV supplies, compared with connections of 132kV or 275kV for large data centres.
However, existing substations and electrical equipment do not necessarily guarantee sufficient capacity for new tenants.
Investors should obtain confirmation from Tenaga Nasional Bhd and engage qualified electrical consultants to establish available supply, connection requirements and potential upgrade costs.
His comparison of two factories, each with 40,000 sq ft of built-up space, illustrated the importance of assessing total investment costs rather than purchase price alone.
Although one property was about 15 per cent more expensive per sq ft, its lower refurbishment and utility upgrade costs brought the total investment to RM14.01 million, against RM15.29 million for the cheaper property.
This represented a potential saving of RM1.28 million.
Based on an assumed monthly rental of RM2 per sq ft and full occupancy, both properties could generate RM960,000 in annual gross rental income.
However, the better-equipped property offered an illustrative gross yield of 6.9 per cent, compared with 6.3 per cent for the cheaper asset.
Nasser said having a factory ready for occupation six months earlier could also generate an additional RM480,000 in gross rental income, assuming a tenant was available.
He identified Senai-Kulai, Pasir Gudang and Gelang Patah-Iskandar Puteri as industrial corridors where selected older factories could offer opportunities, subject to their condition, utility capacity, land restrictions and regulatory requirements.
While Johor would continue to need modern industrial parks, he said not every manufacturer required a purpose-built facility.
The opportunity, he said, was to identify older factories that could be economically repositioned rather than assume every lower-priced property was a bargain.