Characteristics and Role of the Malaysia Commercial Real Estate Market

Abstract

The commercial real estate market in Malaysia is a high-performing and important emerging real estate market in the Asia-Pacific region and globally. It has the features and qualities usually found in a developed real estate market, as it is one of the few emerging real estate markets with an open and transparent status. This study highlights the investment performance characteristics and added-value role of Malaysian commercial real estate in a mixed-asset portfolio over the 10-year period of 2010-2019. The results indicate a distinction in the risk-adjusted performance of commercial real estate investment in Malaysia. In particular, direct real estate’s risk-adjusted performance significantly exceeded that of the commonly held asset classes such as bonds and stocks. However, the risk-adjusted performance of listed real estate was hampered by its high level of volatility. Further, direct real estate and, to a slightly lesser extent, listed real estate were able to potentially enhance a portfolio’s performance when deployed in a diversified investment portfolio. Overall, this study provides an empirical validation of the unique performance characteristics of commercial real estate in Malaysia, as investors seek to reconfigure their portfolios using assets with potential for greater investment returns in this current highly volatile investment environment.