Commercial Property Market Trends in Malaysia 2025

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Introduction

When someone says "commercial property," they think it's all one thing. Like, you either invest in commercial or you don't. Simple, right?

No. Not even close.

Commercial property is not one market. Retail, office, industrial, and hospitality all behave differently. I'm talking completely different personalities. What works for a warehouse in Shah Alam has nothing to do with what works for a shoplot in Cheras.

Based on the Laporan Pasaran Harta 2025 and just... looking around at what's actually happening on the ground, here's the real story:

Industrial wins. Hospitality recovers. Retail and offices lose.

Some segments are absolutely on fire right now. Others? They're bleeding vacancy and nobody wants to admit it.

Let me walk you through each one.

Industrial: The Clear Winner

If you put money into industrial property two or three years ago, warehouses, logistics hubs, factories, data centres, you are probably doing very well right now. If you didn't? Well, you're not alone. But you missed the boat.

What's driving this? Three things. And they're all big.

First, e-commerce logistics. Think about your own life. When did you last go to a physical store for something that wasn't groceries or emergency medicine? Probably a while ago. Meanwhile, how many packages did you get from Shopee, Lazada, or TikTok Shop last month? Exactly.

All those parcels come from somewhere. A warehouse. Not just any warehouse—one that's close to highways, close to customers, designed for speed. Demand for these spaces along the NKVE, ELITE, and SKVE corridors? Through the roof.

Rentals are up

Vacancy is almost non-existent in the good spots

Second, data centres. This one surprised a lot of people, but it's huge. Johor especially has become a magnet. Google, NVIDIA, Microsoft, ByteDance—they're all here or coming here.

Why? Cheap power, available land, government incentives, and proximity to Singapore without Singapore prices. These data centres need massive amounts of industrial land. And they pay. The ripple effect on surrounding properties—suppliers, contractors, support services—is real.

Third, manufacturing. The whole "China + 1" strategy is actually benefiting us. Companies want to diversify away from just China. Vietnam and Malaysia are the biggest winners. More factories means more demand for industrial space.

The result? Rental yields are strong. Vacancy is low. And here's the key difference between industrial and, say, residential speculation: this is genuine, sustainable demand. These companies aren't renting because they think prices will go up. They're renting because they have goods to move, servers to cool, and products to make. That's not going away.

What this means for you: Focus on industrial. But be smart about location.

Near ports? Good (Port Klang, Tanjung Pelepas)

Near major highways? Good

Near population centres for last-mile logistics? Also good

Shah Alam, Bukit Raja, Batu Kawan in Penang, Sedenak in Johor—these are the names to watch.

Hospitality: Recovering but Segmented

Alright, let's talk about hotels and resorts.

Remember 2020 and 2021? Hotels turned into quarantine centres. Resorts were empty. Staff laid off. It was brutal. I know hotel owners who almost lost everything.

Fast forward to 2025 and 2026. Things are better. Not perfect, but better.

Hotels and resorts are bouncing back post-COVID. You can see it yourself. Try booking a weekend stay at a decent resort in Langkawi or Port Dickson without paying a premium. Not easy, right? That's demand.

But here's the nuance that most news articles skip:

Domestic tourism leads recovery. Malaysians are travelling again. Not to Paris or Tokyo (though some are), but to Penang, Kuching, Kota Kinabalu, and the east coast. Staycations. Road trips. Long weekends at beach resorts. That's what's filling hotel rooms right now.

International is slower. Chinese tourists? Coming back, but not in the pre-COVID flood. European and American tourists? Still below 2019 levels. The ringgit helps—we're cheaper now—but flight connectivity isn't fully back.

Best locations: Tourist hotspots with natural draw. Penang (George Town and Batu Ferringhi), Langkawi, Kota Kinabalu, Kuching. If your hotel is in, say, Cyberjaya or a suburban business park? Different story entirely.

Here's the honest truth: Recovery is real but not yet at pre-COVID levels. The numbers are climbing. Occupancy is up. Average daily rates are rising. But we're not back to 2019 yet. Probably 2027 or 2028 before we get there.

One more complication: New supply coming online. Luxury hotels, boutique resorts, budget chains—everyone is betting on recovery. More competition. Not every new hotel is going to survive the first three years.

What this means for investors: Hospitality works best if you're an operator. Someone who actually runs the hotel, manages the booking platforms, deals with housekeeping, fights with Agoda over commissions.

Passive investor buying a strata-titled hotel room? Honestly, be very careful.

That model has burned a lot of people. Management companies take big fees. When occupancy drops, you're holding the bag.

Retail: Still Struggling

Okay, let's address the elephant in the mall.

Shoplots and shopping malls face high vacancy. Walk into any suburban mall in the Klang Valley on a weekday afternoon. Go on, I'll wait. What do you see? Maybe some teenagers hanging out. A few families at the food court. But empty shops? Lots of them. "For Rent" signs in windows that used to be clothing stores or phone shops.

Why? E-commerce. And it's not temporary. It's permanent.

Why drive 20 minutes, pay for parking, fight for a space, walk through a crowded mall, stand in line... when you can click a button and get the same thing delivered tomorrow?

And it's not just clothes and electronics anymore.

Groceries? GrabMart and Pandamart

Furniture and appliances? People buy those online too

So who survives? Two categories. Only two.

First, well-anchored malls. Suria KLCC, Pavilion, Mid Valley, 1 Utama, Sunway Pyramid. These aren't shopping destinations. They're experiences. People go there to eat, meet friends, watch movies, bring their kids to the playground, and maybe buy something while they're there. Right tenant mix, right foot traffic, right management. They're fine.

Second, essential-service shoplots. Things you can't get online—or don't want to.

Clinics, dentists, pharmacies

Hair salons

Hardware shops (you need to see the exact screw size)

Convenience stores for emergency milk at 10pm

Car washes, laundromats

These businesses need physical space in residential areas. They're doing okay.

Everything else? Fashion boutiques. Gift shops. Mobile phone accessories. Specialty retail that isn't essential. Struggling. Many have closed. Many more will close.

What this means for investors: I'm going to be very direct here.

Avoid new retail unless location is prime AND tenant is secured

Do not buy that shiny new shoplot just because the brochure looks nice

Do not believe the developer's rental guarantee (read the fine print—it's usually a rebate from your own purchase price)

Unless there's already a signed tenancy agreement with a real, creditworthy tenant—like 7-Eleven, a pharmacy chain, or a reputable clinic—just say no

I've seen too many friends get burned on retail investments. Don't be one of them.

Office: The Weakest Segment

I almost feel bad saying this, but it's true.

High vacancy in KL city centre and many suburban areas. Drive around Bangsar South, Puchong, Glenmarie, even parts of PJ. Look at those office towers. Then check the parking lots during office hours. Half empty? Sometimes more than half.

Now scroll through mudah or PropertyGuru. Offices for rent everywhere. Prices have been dropping for years.

Why? Remote work and hybrid models. This isn't a temporary hangover. It's permanent.

Think about it. Companies used to need a desk for every employee. Now? Maybe 60% of desks. Some people are fully remote. Others come in two or three days a week. Hot-desking is normal. A company that needed 50,000 square feet now needs 30,000. That's a 40% cut. And that space is never coming back.

So who survives? Only Grade A offices with green certifications. The Gardens, Menara Prestige, G Tower, the newer TRX towers. MRT access, good security, gyms, cafes, and Green Building Index or LEED certification. Big multinationals and banks want these. ESG commitments and all that. A green building helps them look good.

What about the rest? Grade B and C offices in older buildings? Bleeding. High vacancy, falling rents. Landlords are throwing in free parking, renovation allowances, months of free rent - just to get someone in the door.

Hard truth: Traditional office isn't recovering anytime soon. If you own an old office building, start thinking about conversion. Residential? Maybe. Hotel? Possibly. Medical suites? That's actually growing - private healthcare is booming. Co-working? Overcrowded market, but maybe.

But waiting for traditional office demand to come back? That's not a strategy. That's wishful thinking.

Regional Differences

Now let's zoom out. Because Malaysia is not one market. What works in Selangor might be a disaster in Johor.

Klang Valley (KL, Selangor, Putrajaya)

Industrial: Booming. Shah Alam, Klang, SKVE corridor. If you own land there, congratulations.

Retail & office: Weak. Too much supply. Big malls survive. Neighbourhood malls? Struggling.

Hospitality: Moderate. City hotels recovering slowly. Resort areas like Kuala Kubu Bharu doing better on domestic tourism.

Penang

Industrial: Very strong. Batu Kawan is becoming the Silicon Valley of the East. Western Digital, Bosch, Dexcom are there or expanding.

Retail: Stable but not growing. Queensbay and Gurney Plaza are fine. Newer malls? Be cautious. Penang doesn't need more retail space.

Johor

Industrial: Growing near ports (Tanjung Pelepas, Pasir Gudang) and data centre hub (Sedenak). Investments are huge.

Retail: Oversupplied. Too many malls. Some are okay. Many have high vacancy.

Hospitality: Tied to Singapore tourism. Good when they come. Bad when they don't. RTS Link (late 2026) might make day trips easier - fewer overnight hotel stays.

East Malaysia (Sabah & Sarawak)

Industrial: Emerging but slow. Nothing like Klang Valley.

Hospitality: Recovering. KK and Kuching seeing good numbers - domestic plus South Korea, China, Brunei.

Retail: Oversupplied in some towns. Miri, Sibu, Bintulu - too many shoplots, not enough tenants. Be careful.

What This Means for Investors

If you've read this far, you're serious. So I'll be serious with you.

First: Invest in industrial. Full stop. E-commerce isn't going away. Logistics isn't going away. Data centres aren't going away. Manufacturing is shifting in our favour. This is the most sustainable demand in commercial property right now. Follow the money.

Second: Avoid retail and traditional offices. Unless you have a very specific, very compelling reason—and preferably a signed tenant with a strong covenant—just stay away. There are better places for your money. I know shoplots feel familiar. I know older investors will tell you "shoplot is forever." But the world has changed. Don't let nostalgia cost you returns.

Third: Hospitality only if you are an operator, not a passive investor. Don't buy a strata-titled hotel room and hope for rental returns. That game is tough. The management fees will eat you alive. If you want hospitality exposure, buy a small resort or budget hotel and run it yourself—or partner with someone who actually knows how to run a hotel. Or just invest in a hospitality REIT instead of direct ownership.

Fourth: Follow logistics, e-commerce, and manufacturing. That's where the money is flowing. Avoid shoplots and old office buildings. They are yesterday's story. I don't say that to be harsh. I say it because I've seen too many people lose money holding onto assets that don't match market reality.

So there you have it.

Choose your lane wisely. Do your own homework. Talk to local agents. Visit the properties yourself. Don't just look at brochures.

And if someone tries to sell you a "guaranteed return" shoplot in a new development? Run the other way.

Good luck. Happy investing. And may your vacancy rates be low.