Older Johor factories offer investors cost-saving opportunities

JOHOR BARU: Older factories with existing infrastructure may present cost-effective investment opportunities as Johor's industrial sector expands, according to JS-SEZ Monitor founder Nasser Ismail. While newer facilities enjoy higher valuations, older industrial properties can be attractive alternatives if they meet tenants' electricity and water requirements.

Investors should consider refurbishment, utility upgrades, and preparation time when evaluating properties, as these factors can significantly impact overall costs. A cheaper property requiring major upgrades may prove more expensive than a newer facility with a higher price tag. As industrial activity and data centre expansion increase, electricity and water availability become crucial considerations for investors.

Existing substations and electrical equipment do not guarantee sufficient capacity for new tenants, so investors should verify supply, connection requirements, and potential upgrade costs with Tenaga Nasional Bhd and qualified electrical consultants. Comparing two 40,000 sq ft factories, one 15% more expensive per sq ft, showed that its lower refurbishment and utility upgrade costs resulted in a total investment of RM14.01 million, compared to RM15.29 million for the cheaper property.

This represents a potential saving of RM1.28 million. Both properties could generate RM960,000 in annual gross rental income, with the better-equipped facility offering a higher gross yield of 6.9% compared to 6.3% for the cheaper option. Industrial corridors in Johor, such as Senai-Kulai, Pasir Gudang, and Gelang Patah-Iskandar Puteri, could offer opportunities for older factories to be economically repositioned, provided they meet condition, utility capacity, land restrictions, and regulatory requirements.

While modern industrial parks remain necessary, not every manufacturer requires a purpose-built facility.