The Malaysian Government is drafting an amendment to the Employment Act 1955 (Act 265) that requires employers to provide adequate housing for foreign workers in all sectors. The law is expected to be submitted to the Malaysian Parliament in 2018.

The recently proposed amendment to the law calls for employers in all sectors – construction, manufacturing, security, food and beverage and others – to provide living quarters for their foreign workers. 

JLL Report at a glance:

• New law for workers' accommodation will create new business for operators wishing for the opportunity to provide accommodation for workers within industrial estates or for construction workers throughout the country.
• Huge potential considering that Malaysia has one of the world’s highest growth in construction activities averaging 15.5% in nominal terms out to 2021 according to Timetric’s Infrastructure Intelligence Centre (IIC).
• Both the construction and manufacturing activities in Malaysia have been growing strongly at 7.6% and 5.5% in 2017 and will continue to do so in 2018.
• Centurion Corporation Limited, one of Singapore’s largest workers’ accommodation provider and a developer has already started expanding into Johor and Penang. 

The need for worker's accommodation

The law now stipulates that only plantation companies must provide living quarters for foreign workers. Workers’ accommodation for the non-plantation industry is a relatively new industry in Malaysia and can offer new opportunities for Real Estate Investment Trust companies (REIT). It may be within the industry’s interest to expand rapidly which can be done by selling off the worker accommodation assets to REIT companies and recycle the capital into expansion plans.

Currently, there are over two million registered legal foreign workers in Malaysia. Of these, an estimated 399,000 are foreign construction workers and 819,000 are foreign manufacturing workers. 

In Malaysia, the construction and manufacturing sector has been growing rapidly with a real GDP growth rate of 7.6% and 5.5% respectively in 2017. The Finance Ministry has forecasted an equally strong growth for both sectors in 2018.

The Master Builders Association Malaysia (MBAM) recently estimated that there are about 1.3 million foreign workers needed at construction sites throughout the country in 2016 and currently, there is a shortage of these workers.

Traditionally, infrastructure and transportation have received the largest share of public sector development expenditure and the biggest recipient of the five-year Malaysia Plans. With many large infrastructure projects planned for Malaysia and the One Belt One Road Initiatives, the demand for foreign and local construction workers will continue to remain high in the next five years. 

Westlite dormitory operation in Johor

Westlite has already started operations in Johor and Penang, where nine workers' accommodation projects are underway, seven in Johor and two in Penang. The seven operating assets in Johor have a current capacity of 23,900 beds while the two projects in Penang are expected to have a capacity of around 6,000 beds each. The operational Malaysian assets have been achieving quite high occupancy rates of about 82%. The land areas range from 5,718 sqm to 30,174 sqm. The larger ones will offer a number of facilities including:

• Basketball, volleyball and badminton courts
• Recreation room
• Food court
• Mini-market and supermarket
• Internet room
• Outdoor exercise corner

Apart from the private sector, the government, including Perbadanan Kemajuan Negeri Selangor (PKNS), a local statutory corporation, has taken the initiative and started to accelerate some of these measures, but there is room for the private sector to take advantage of this new opportunity.

Hostel for Western Digital workers 

PKNS has taken the opportunity to lead in this market by building hostels for Western Digital (WD) workers. The hostels are included in Phase I of the Datum in City project and consist of three blocks of nine-storey apartments that can accommodate 10,000 workers; there are also 5,000 parking bays. The total land area is 6.08 acres. There are 432 apartment units in three sizes – 475, 865 and 971 sqm. The project is located at Jalan SS8/6, next to Lebuhraya Damansara-Puchong and the Federal Highway. 

Construction Labour Exchange Centre Berhad

After signing an agreement with Mass Rapid Transit Sdn Bhd (MRT), Construction Labour Exchange Centre Berhad (CLAB) will operate and rent out the units previously built by MRT to house workers involved in the construction of the Sungai Buloh- Kajang Line in 2011. Centralised Labour Quarters (CLQ) are built for small-to-medium construction companies that are unable to build their own labour quarters and could instead rent the units for their workers. CLQ, located near the MRT Depot along Jalan Sungai Buloh, will consist of six blocks with 144 rooms and will be able to support up to 864 workers in total. 

Construction of three of the eight CLQ blocks will start in 2018. The other five will be completed by 4Q20. 

Summary

Workers’ accommodation is a relatively new market in Malaysia that has yet to be fully explored. 

The success of this new venture into workers' accommodation will come from employers understanding the needs of their workers and providing for those needs at a price that is compatible with what employers want and in a location that is near to the workplace.  

Going forward, this industry has great potential as Malaysia's manufacturing and construction industry continues to expand. Growth in infrastructure spending in Malaysia is expected to be among the fastest in the world in future, averaging 15.5% in nominal terms out to 2021 according to Timetric’s Infrastructure Intelligence Centre (IIC) as Malaysia’s has set a goal for the end of the decade to achieve advanced economy status.

Source: JLL Malaysia 

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