Johor is witnessing a surge in data centres, with over 50 centres currently in the application, construction, or operational stages, and even more expected in the near future. According to Samuel Tan, CEO of Olive Tree Property Consultants Sdn Bhd, this growth is set to continue, particularly with the launch of the Forest City Special Financial Zone (SFZ) and the Johor-Singapore Special Economic Zone (JS-SEZ), which are expected to drive significant foreign direct investment (FDI) into the region.
Tan highlighted that despite the influx of data centres in Malaysia, Johor remains a prime location for data centre operators. โMany operators are still eager to establish facilities in Johor,โ Tan noted, pointing out that local property developers are increasingly welcoming these operators as anchor tenants in their industrial parks.
Addressing Power and Water Challenges
While Johor’s data centre expansion brings substantial economic potential, it also comes with challenges, particularly regarding power and water supplies. Tan is optimistic that these challenges will drive the development of renewable energy solutions, including solar farms and water desalination plants, which will provide more sustainable resources and create numerous job opportunities for locals.
“We expect to see more innovative solutions like solar energy and desalination plants that will, in turn, boost employment in the region,” Tan said, adding that the presence of data centres is likely to spur other industries, particularly in high-end electrical and electronics (E&E), semiconductors, pharmaceuticals, and real estate.
Growth of Industrial and Real Estate Sectors
The presence of data centres is not only transforming Johor’s industrial landscape but is also expected to generate demand for housing, office spaces, retail outlets, and worker accommodations. Tan believes that the E&E sector, which is one of Malaysiaโs largest export contributors, will particularly benefit from the increase in investment.
โWe foresee more companies, especially those based in Singapore, taking advantage of initiatives like the JS-SEZ and SFZ to establish manufacturing plants in Johor,โ Tan said.
He also highlighted the importance of small and medium enterprises (SMEs), which form the backbone of Malaysiaโs economy. “SMEs provide a steady stream of employment and are a permanent feature of our economy. Offering them fiscal incentives, support for digitalisation, and upskilling opportunities is essential for driving productivity and wage growth,” he added.
Industrial Property Market Outlook
The expansion of data centres and the E&E sector is creating strong momentum in Johor’s industrial property market. Knight Frank Malaysia recently projected that the manufacturing sector will grow by 3.5% in 2024, driven by the recovery of export-oriented industries and sustained domestic growth.
In the Klang Valley, the industrial market had a robust start to 2024, showing increased transaction volumes and values during the first quarter. The firm also highlighted growing interest from institutional investors in assets related to the digital economy, including logistics and manufacturing spaces.
As more companies look to capitalise on Malaysiaโs position as a digital economy hub, prime industrial assets in established locations remain in high demand. Rental rates for high-specification logistics facilities, especially those with sustainability features, are expected to rise, reflecting the growing need for modern industrial spaces.
Future Prospects for Johor’s Industrial Sector
Looking ahead, Samuel Tan believes that Johorโs industrial sector will continue its strong performance through 2025, particularly as data centres and the E&E industry attract more foreign investment.
“Johor’s strategic location, combined with its special economic zones and growing industrial capacity, positions it as a key player in Malaysia’s future economic growth,” he concluded.
In addition to the data centre boom, Johorโs manufacturing and logistics sectors are likely to see continued growth, further solidifying the state’s role as a primary engine for Malaysiaโs economic development.
