The investment bank said in its research note that this trend provides developers with new growth avenues and alleviates pressure on residential developments.
It said the seed of the current rally was sown in 2018 with the start of the US-China trade war.
“The trade war and rising geopolitical tensions led global manufacturers to relocate their base in Southeast Asian countries, including Malaysia.
“These steps were set to manage supply chain risks,” it said.
HLIB said that Malaysia, as a relatively neutral nation geopolitically, is benefitting from this trend, as evidenced by the rise in foreign direct investments (FDIs) since 2021.
HLIB noted that the sector’s long-term uptrend is also driven by economic development decentralisation, the rise of second-tier cities, and increasing land value.
For several decades, it said Malaysia’s economic development was primarily focussed in the Klang Valley but recently, industrialisation and investments have spread to Johor, Penang, Sarawak, and Kedah.
“Penang has emerged as a key electric and electronics hub and a rising second-tier city, while Kedah benefits from a spill-over demand from Penang and significant investments from multinational corporations like Infineon and Intel,” HLIB said.
Meanwhile, it said Sarawak is focussing on renewable energy.
In addition, it said Johor has seen renewed interest due to the construction of infrastructure projects like the Johor Bahru–Singapore Rapid Transit System and Johor-Singapore Special Economic Zone.
“This shift helps alleviate building pressure in the Klang Valley while providing new opportunities across the country for property developers,” it said.
As such, HLIB said industrialisation and rising economic activities are boosting land values in these states.
“Rising power consumption driven by the data centre boom and a rapidly developing economy, coupled with Malaysia’s energy transition goals, are driving solar farm developments and enhancing land values,” it said.
It has maintained an “overweight” call on the property sector with its top picks being IOI Properties Group Bhd with a target price (TP) of RM3.30, OSK Holdings Bhd (TP: RM2.37), Sime Darby Property Bhd (TP: RM2.05) and Sunway Bhd (TP: RM4.51).