Kuala Lumpur’s warehouse market absorbed 2.8 million square feet of new Grade A space in the second quarter of 2026, pushing total stock to 39.58 million square feet, according to real estate services firm JLL. This expansion reflects a broader trend of urban logistics hubs evolving to meet the demands of a rapidly modernizing supply chain ecosystem.
Leasing picks up after holiday lull
Demand rebounded after the Chinese New Year and Hari Raya breaks, with the electrical and electronics, medical, automotive, and fast-moving consumer goods sectors driving most of the activity. Occupiers continued to favor Grade A facilities, prioritizing modern specifications and strategic locations over older stock.
The Shah Alam International Logistics Hub, completed in the quarter, added 2.8 million square feet of new space. About 60-70% of that remains unoccupied while negotiations continue. Despite the vacancy, other new projects showed stronger absorption: Daiwa House Phase 3 reached 70% occupancy within three months of completion, according to JLL. The broader market vacancy rate nevertheless increased to 9.9%.
The market is increasingly bifurcated by asset quality, JLL said.
Rents inch up as older warehouses adapt
Gross rents averaged MYR 2.19 per square foot per month, a 0.6% year-on-year increase. JLL attributed the growth to premium pricing at newly completed projects and step-rent adjustments by REIT-owned properties as leases expired.
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The market is splitting along quality lines. Older facilities have responded to competition by offering longer rent-free periods and additional services to retain tenants, while newer Grade A assets command higher rents without concessions.
That divide is becoming more pronounced as automation reshapes logistics. IJM’s Storio Logistics at Elmina, set to open by year-end, will include automated storage and retrieval systems with 100,000 pallet positions and automated guided vehicles.
The shift toward high-spec facilities is accelerating, but cost pressures from reduced government fuel subsidies are clouding the outlook for future development. JLL said the growing adoption of automation reflects a broader shift towards high-specification facilities. At the same time, reductions in government petrol subsidies have introduced uncertainty over construction costs and development feasibility, making cost pressures a key issue for the market’s future pipeline.
Pipeline leans toward automation
JLL expects more developers to integrate automation into new projects, though rising construction costs could delay some plans. The firm noted that while demand for quality space remains strong, the pace of absorption will determine whether the current vacancy rate holds or climbs further.
