Which Types Of Commercial Property Should You Buy in Malaysia?

When it comes to investing, there are 2 main options:

1. Invest in commercial real estate or

2. Invest in residential real estate

The typical investor will most probably look for residential real estate (e.g. landed house or condominiums) in a strategic location as they believe it is easier to find or secure those tenants and it requires a low-entry point to the market.

But, some of the investors will also look for commercial real estate because the margin of rental is higher and the period of the tenancy is longer than residential real estate. Commercial property is not homogeneous – their performance varies between different property types and locations, therefore, it requires high-entry points to the market.

We list out several types of commercial property available in Malaysia:

1.Shop Lot

Most local businesses can be found in shop-lots like cafes, beauty salons, restaurants, car-workshops, pharmacies, agencies, flower shops, and as well as gyms. The traditional shop lot has always been known as shophouses, as it includes a shop on the ground floor while the top level serves as a living area. Some of these shops are now considered heritage sites and many can be found in places like Petaling Street in KL, Penang shops, and also Malacca shops.

2.Shop Units

Shop units are basically individual units within a shop-lot building. For instance, a 4-storey shop lot might have 4 shop units within it, and each floor with different owners.

Moreover, shop units are generally cheaper and provide a lower entry point for aspiring commercial property investors as they can just buy one individual unit.

The ground floor units typically operate eateries, grocery shops, stationary shops, while the upper floors are used as offices, beauty salons, gyms, and other shops as well.

3.SoVos or SoFos

SoVos and SoFos are commercial properties and commonly used as office. However, SoVos and SoFos have grey area where owners usually utilise their office (e.g. SoFos) as both a home and a workplace, similar to a SoHo’s usage. There are no rooms or partitions within a SoFo unit too, thus allowing owners to customize their living or working space.

4.Office Lot

Usually, office lots or officially known as Purpose Built Offices (PBOs) by JPPH are located within large multi-storey buildings and skyscrapers. Several companies may share a floor or can occupy an entire floor, depending on the design of the building.

5.Factory or Warehouse

Purchasing a factory or warehouse may seem intimidating for some, but for others it is a worthwhile investment strategy for long-term passive income. Renting out a warehouse is a rewarding venture, as logistics, productions, e-commerce, technology, and small-medium businesses (SMEs) are looking for suitable locations for their storage and production facilities. Because of the size of a typical warehouse, the income potential in rent from a warehouse is significantly bigger than other commercial properties. Additionally, rental income from warehouses is extremely stable when compared to other commercial properties.

6.REIT

While Malaysian real estate investment trusts (M-REITs) are not technically commercial property in the conventional sense, they are still a form of property investment that involves commercial properties in Malaysia.

When it comes to investing in commercial properties, 3 Golden Rule applies across all business assets like location, amenities, and a solid population catchment. A commercial property is riskier than residential property, but it does generate bigger returns.

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