Property
A treasure trove of redevelopments
Joseph Wong 
Pandora is among the first serviced residences to be completed in Tropicana Metropark
advertisement[x]

UNDEVELOPED land in Kuala Lumpur is getting scarcer in light of rapid growth in recent decades, with the population of Greater KL expected to hit 10 million in the next three years.

Many developers acknowledge that although there are still undeveloped parcels of land within the city limits, many are individual lots which are too small for big integrated developments.

While greenfield options are limited, abandoned or under-utilised brownfield properties, especially industrial lots, tend to be of substantial size with potential for redevelopment.

Those within Greater KL are potential goldmines. FocusM has identified at least 12 former industrial properties with completed, ongoing and future mixed development projects with a combined gross development value (GDV) of over RM20 bil (see table).

Five projects by Tropicana Corp Bhd and Mah Sing Group have a combined GDV of RM12.69 bil.

Others include properties in Section 13 in Petaling Jaya such as Jaks Island Circle Sdn Bhd’s RM1.1 bil Pacific Star project, IOI Properties Group Bhd and Sime Darby Brunsfield Holding Sdn Bhd’s RM557 mil PJ Midtown joint project and Paramount Corp Bhd’s proposed RM730 mil Atwater.

Pioneering developers in Section 13 with large-scale redevelopment projects are Jaya33 Sdn Bhd, which kicked off the area’s conversion of industrial properties to mixed developments comprising Jaya33 and office development Plaza33, and Tetap Tiara Sdn Bhd’s Jaya One, which has a GDV of close to RM1 bil.

The Plaza33 land was previously occupied by the Malaysian Feedmill factory, while Jaya One sits on the site of the former Aluminium Company of Malaysia Bhd factory.

 

Urban regeneration

Rahim & Co research director Sulaiman Saheh says that going forward, this redevelopment trend is expected to pick up pace. “This is actually a form of ‘urban regeneration’ process and has been practised for the past decade or so, though more often recently with the mixed-use development plans.

This redevelopment trend is a form of ‘urban regeneration’ process, says Sulaiman

“It is an urban development approach that utilises vacant or brownfield sites located within established city areas. Brownfield is generally defined as vacant or underutilised existing commercial or industrial sites,” he says.

As cities grow in tandem with modernisation and population increases, some parcels of land may lose their original purposes and only hinder urban growth if left under what is then considered as non-conforming use, he says.

Industrial functions, he adds, will invariably move further away from the city into the suburbs which indirectly spur economic growth in these relatively less mature areas.

Section 13 is a prime example as its industrial zones have been redesignated for mixed commercial and residential purposes. The triangle-shaped area, bordered by Jalan Universiti, Jalan Semangat and Jalan Kemajuan, has 78 individual industrial lots.

 

Potential unleashed

Paramount Corp Bhd group CEO Jeffrey Chew says Section 13’s transformation from an industrial area to a mixed-use development zone by the Petaling Jaya City Council (MBPJ) has unleashed the potential of this address.

The group is redeveloping its 2.1ha former KDU campus into a RM730 mil mixed development called Atwater.

Similarly, OSK Holdings Bhd is expected to unveil its mixed development project Ryan & Miho, next to Atwater, on Oct 14-15.

The rezoning exercises are not only restricted to Kuala Lumpur and its satellite Petaling Jaya, as other areas like Shah Alam and Subang Jaya are also seeing this trend.

The key lesson we learnt was to dream bigger, says Leong

One such development is Mah Sing Group’s RM100 mil industrial project iParc 1 in Bukit Jelutong, Shah Alam, which comprises three storey semi-detached corporate factories. It was previously an old factory site, says its managing director Tan Sri Leong Hoy Kum.

The developer’s most prominent redevelopment project is its RM3.17 bil Icon City in SS8, Sungai Way, which is built on the former Matsushita Group plant.

“We bought the 20-acre (8.1ha) land for RM89 mil or about RM104.23 per sq ft (psf) in October 2009. We are open to developing more mixed developments regardless of the original land use, as long as the projects meet our business strategy,” says Leong.

Apart from Icon City, Mah Sing has also redeveloped several other brownfield projects, he adds. They are the RM256 mil Southgate in Sungai Besi, RM1.6 bil M City in Ampang and RM452 mil Icon Tun Razak along Jalan Tun Razak, all in Kuala Lumpur.

Similarly, the 37.2ha Tropicana Metropark in Subang Jaya, which is one of the biggest redevelopment of a former industrial land to date, is driving the redevelopment trend in the suburbs. Tropicana Corp Bhd acquired the former Hi-Tech Industrial Park for RM385.5 mil in 2011.

Tropicana Metropark will be developed in 10 phases of residential, commercial and education components as well as a 3.7ha central park. The development, with an estimated GDV of RM7.2 bil, is slated for completion in 2027.

 

Striving for something bigger

With growing urbanisation and well-established communities, redevelopment of these industrial land pockets have a much better chance of success as they are already surrounded by stable and stronger market catchments, says Rahim & Co’s Sulaiman.

Mah Sing’s Leong concurs. “The key lesson we learnt was to dream bigger. When we acquired the [Matsushita Group] land in 2009, we planned a very typical project with some shops and other residences, and that proved to be a rather conservative plan.

“But to do justice to the prime location, we took the time to strategise and rethink the concept, and the present Icon City is the result,” he says.

Citing the examples of Icon City and Tropicana Metropark, Sulaiman foresees larger-scale redevelopment projects in future instead of conventional residential towers or shopping malls.

“Developers are looking at creating self-contained communities and this level of development will require high costs,” he says.

“From the perspective of redeveloping an industrial land, the first challenge would be expenses needed to reconstruct the land to some extent. Not only are we looking at constructing buildings, but also landscape and infrastructure as well.

“In addition, a green landscape goal will require further study on the suitability of the land, especially a contaminated site from previous industrial waste.”

 

Pricing issues

A mixed-use development must also blend with the existing community in terms of affordability and lifestyle, says Sulaiman.

“If there is any mismatch, the development either falls short or current residences are faced with escalating house prices. With the affordability issue at the forefront in recent years, pricing plays a crucial part in the success of urban growth.”

Pricing, he adds, is a key factor due to costs of converting the built environment, reconfiguring access routes, underpasses and flyovers, managing the aesthetics and branding of the development.

An aerial view of Icon City’s inner green park

“For example, in Icon City, residential unit prices seem to hover between RM800 and over RM1,000 psf, which puts the development as a relatively high-end product. And with this as a benchmark, existing and future properties will be affected by this new price level,” Sulaiman says.

According to Mah Sing’s Leong, Tower 1, Tower 2 and Tower 3A residential units are selling for RM850, RM774 and RM745 psf respectively. Commercial and Neon Food Hub units are priced at RM905 and RM1,435  psf respectively, he says.

“Based on our market study, we estimate the rental rate for our Neon Food Hub to be between RM5 and RM6 psf.”

The asking prices for Jaya One residential units are less than RM800 psf, with a 1,292 sq ft unit transacted on June 28 last year at RM800,000 or RM619 psf.

Cherish Springs Sdn Bhd’s RM500 mil Centrestage project in Section 13 was priced as high as RM1,030 psf for a 301 sq ft office suite on Dec 8, 2015. A 689 sq ft unit was transacted on Aug 18 last year at RM508,000 or RM737 psf. The drop in value could be due to the market slowdown.

Units at PJ Midtown, next to Centrestage, were reportedly priced at RM850 psf at the project launch in 2015.

Paramount Corp’s Atwater is expected to be priced at around RM800 psf, possibly the most affordable new development in Section 13.

Rahim & Co’s Sulaiman sees spiralling prices for redevelopment projects, not just in Malaysia but also worldwide. Despite this, redevelopment is an unstoppable trend, he says.

“Looking at the Klang Valley, we see potential industrial land to be redeveloped, especially in Petaling Jaya and Subang Jaya.

“Examples are Subang Jaya Industrial Estate, Subang Jaya Light Industrial Park (USJ 1), and Section 13 in Petaling Jaya. A recent land transaction by British American Tobacco (M) Bhd (in Section 19) was carried out, signalling a potential urban regeneration of industrial land,” he says.

Another disused industrial plant ripe for redevelopment is the 7ha occupied by the former Malaya Acid Works Sdn Bhd factory (see sidebar).

With this growing redevelopment trend, more exciting projects will come to the fore in the Klang Valley and beyond.

Three more projects with RM6b GDV

THREE former factories in Petaling Jaya, Selangor look set to be transformed into integrated developments with an estimated combined gross development value (GDV) of over RM6 bil.

One of them belonging to Malaya Acid Works Sdn Bhd, located in Section 51A fronting the Federal Highway, is still on the market.

“The property is still available and we are still sourcing for buyers,” confirms international property consultant Rahim & Co’s research director Sulaiman Saheh. It is valued at RM330 to RM350 per sq ft (psf), he adds.

At that price range, the 7ha could be potentially worth RM248 mil to RM264 mil.

That is three times more than what Mah Sing Group paid for the former Matsushita Group plant in nearby Sungai Way. However, the transaction, at RM89 mil or about RM104.23 psf, was done eight years ago on Oct 28, 2009 and land prices have since escalated. Mah Sing built the integrated Icon City on the land.

An aerial view of Icon City’s inner green park

The other two sizeable plots of land yet to be redeveloped are the former British American Tobacco (M) Bhd (BAT) factory in Section 19, and the former factory of Fraser & Neave Holdings Bhd (F&N) in Section 13.

The BAT property, bought by LGB Properties (M) Sdn Bhd for RM218 mil or RM382 psf, will be redeveloped into a mixed development with a GDV of RM2.3 bil, while F&N’s proposed mixed development has a GDV of RM2 bil.

The Malaya Acid Works land, spreads over nearly 7ha (17.3 acres), is the biggest of the three plots. This means a mixed development worth more than the projected GDVs of the other two can be constructed, says a property observer. “The other two properties are smaller. BAT is 5.2ha and so is F&N’s,” he says.

Malaya Acid’s land at Lot 17, Jalan 219, which is made up of four adjacent plots on a lease that expires in 2067, was for decades part of the group’s operations producing sulphuric acid. The plant is believed to have shut down a few years ago.

If surrounding projects are taken as an indication, the land can probably secure a plot ratio of 1:4 or higher.

BAT disposed of its factories and two parcels of leasehold land in Jalan 19/1, Petaling Jaya to LGB Properties in June last year. The sale comes with a one-year tenancy agreement for the seller to continue to use the site, but the new owner is planning a RM2.3 bil mixed-use development.

F&N, on the other hand, has postponed its integrated project, a joint venture with Singapore-based Frasers Centrepoint Ltd, since it was mooted in 2011.

The project was to comprise a shopping mall, three 32-storey towers with a total of 900 serviced apartment units, a tower of small offices home offices, a corporate office block and a 16-storey hotel.

The project was supposed to be the maiden property development for F&N, which owns the land on the corner of Jalan Universiti and Jalan Kemajuan.

A company source says F&N and its JV partner are reviewing the development concepts for Fraser Centrepoint to ensure its relevancy and marketability.



This article first appeared in Focus Malaysia Issue 254.