Cross Border Capital Drives Investment Surge Johor Singapore Special Economic Zone
The first four months of this year saw a significant increase in investments flowing into Johor’s property market, with more than half coming from cross-border sources. According to Apac Capital Markets’ executive director at Colliers Singapore, Govinder Singh, these investors are primarily interested in acquiring development sites within the Johor-Singapore Special Economic Zone (JS-SEZ) to expand their land banks.
Singh shared this information during a presentation titled “Bridging Borders: Real Estate Opportunities in the Johor-Singapore Special Economic Zone” held on May 6 at the Maybank Tower. The event was jointly organized by Maybank Singapore and the Real Estate Developers Association of Singapore (Redas). According to Colliers’ research, cross-border investments accounted for 51.8% of the total real estate investment inflows into Johor, with investors from Singapore, Japan, the US, China, Australia, Canada, Hong Kong, the UK and Taiwan leading the way.
In addition, Real Estate Investment Trusts (REITs) and listed real estate entities made up 41.2% of the capital inflows into Johor during the first four months of the year, with the remaining investments coming from institutional and private funds. Last year, investment inflows into Johor amounted to approximately $2.1 billion, with a further $700 million committed year-to-date.
According to a spokesperson from Redas, the proposed JS-SEZ presents new opportunities for cross-border collaboration and investment between Singapore and Johor. They stated that while the initiative is still in its early stages, there is growing interest in its potential across various sectors such as real estate, trade, infrastructure, and hospitality.
Real Estate Investors and developers have responded positively to the formal signing of the JS-SEZ agreement in January, according to Alvin Lee, the country CEO of Maybank Singapore. He stated that as an integrated zone for business and investment, the JS-SEZ aims to drive activity across 11 sectors and expects to support the development of 100 projects over the next ten years.
Lee believes that the JS-SEZ represents a bold attempt by Malaysia and Singapore to cooperate on a bilateral basis. He added, “At this take-off stage, we are at an inflection point. From our interactions with our clients, there is strong interest from international businesses seeking a safe haven with a strong rule of law and access to resources in these uncertain times. In this regard, combining the complementary strengths of Malaysia and Singapore, the JS-SEZ is a compelling proposition.”
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Vinothan Tulisinathzan, the Minister Counsellor of the Malaysian Investment Development Authority (MIDA) in Singapore, shares this view, stating that the establishment of the JS-SEZ will give investors more choices. He explains that they can choose to set up high-value services in Johor, support manufacturing growth in Singapore, or anchor regional operations within the SEZ.
The JS-SEZ spans nine flagship zones across southern Johor, with each designated for specific economic activities. Areas such as the Johor Bahru Waterfront and Iskandar Puteri are earmarked as hubs for global services, while the Kulai-Sedenak zone focuses on advancing the AI and quantum computing supply chain, medical devices, and pharmaceuticals.
According to Tulisinathzan, Johor’s economy has undergone significant transformation in recent years, and the government is keen to attract and retain more skilled workers to support the growth of high-value service and manufacturing industries. However, he added that employers must shift their focus and offer competitive wages to attract local workers, rather than relying on low-wage foreign labor.
To address this issue, the Forest City area, located closer to Singapore, is set to be developed into a Special Financial Zone. This initiative will offer incentives to boost financial services, including family offices and fintech, while also converting the zone into a duty-free area.
Singh notes that the significantly lower cost of development and industrial land in Johor compared to Singapore will be a key driver of growth in the JS-SEZ over the next decade. He highlights that, on average over the past five years, industrial land in Johor has been around 96% cheaper compared to Singapore.
Building on this cost advantage, Singh believes that opportunistic investors and developers should focus on select real estate assets poised to benefit from a successful JS-SEZ. He recommends properties that support business tourism, international tourism, and certain residential segments as particularly promising.
He believes that Johor is well positioned to capitalize on the incentives from the SEZ and connectivity to Singapore to offer complementary meetings, incentives, conferences, and exhibitions (Mice) solutions and grow the contributions from business tourism in Johor. Singh adds that the SEZ is set to develop new Mice facilities, hotels, and retail projects, creating a thriving Mice ecosystem that is expected to boost hotel occupancy and stimulate retail spending.
Singh also suggests that investing in business tourism, affordable housing, and built-to-rent accommodation within the JS-SEZ could be a profitable investment opportunity. However, he notes that the lack of a vibrant entertainment scene in Johor could limit inbound international tourism and discourage overnight hotel stays. He adds that a more seamless transport connectivity between Singapore and Johor could encourage more overnight stays.
According to Colliers, the number of overnight visitors to Johor could reach around eight million by 2030, up from four million in 2024. This growth will require hoteliers and developers to add approximately 14,000 new hotel rooms to accommodate the increasing demand. Singh notes that investors could benefit from targeting mid-market or four-star hotel assets, given the anticipated rise in demand. There may also be room for a five-star property catering to Mice-related travel. He highlights Desaru, on Johor’s east coast, as a promising area for tourism development.
While Johor’s residential market continues to face an oversupply, with around 3,030 unsold units in 3Q2024, Colliers sees potential in the affordable housing and built-to-rent segments, driven by future demand from the completion of the Johor Bahru-Singapore Rapid Transit System (RTS). This optimism aligns with broader government initiatives aimed at boosting cross-border economic activity. The JS-SEZ represents the most significant effort by both the Singaporean and Malaysian governments to ensure the success of a special economic zone, with comprehensive and far-reaching policies and initiatives introduced so far, says Paul Chong Wee, the director of real estate and corporate banking at Maybank Singapore.
Tulisinathzan reassures that the JS-SEZ is unlikely to be derailed by shifts in Malaysia’s political landscape. He emphasizes that the zone was designed to provide long-term economic advantages for investors, supported by functional, business-centric agreements that transcend political changes. He adds that one of the key goals of the SEZ is for policymakers to collaborate with the private sector to upgrade existing transport infrastructure and address gaps in the industrial production and value chain.
On the other hand, Colliers’ Singh notes that demand for data center development in Johor is expected to moderate in the coming quarters due to limited energy capacity and resources to support future growth. As a result, the development of transport networks and affordable residential projects around transport nodes presents new opportunities for developers. Meanwhile, Maybank’s Lee adds that the hospitality and MICE sectors show strong potential for property development and investments, given the shortage of international quality properties and the increased focus on tourism in light of the government’s goal of attracting 36 million tourists to Malaysia by 2026. He expects Johor to be a major beneficiary of this tourism growth, given its proximity to Singapore and the ensuing bleisure (business-leisure) activities as the JS-SEZ ramps up.