OFFICE
The introduction of an 8% SST (effective July 1, 2025) is expected to influence tenants' space requirements, with many likely to resist rental increases, especially upon renewal, and consider relocating to lower-cost areas, resizing, or delaying expansion plans. During negotiations, tenants may exert additional pressure on landlords to align rental rates with their expectations.
RETAIL
The July 2025 expansion of Malaysia's SST has placed pressure on retailer margins, particularly in discretionary and newly taxable categories. With higher selling prices after the tax, consumers have become more cautious and price-sensitive, reducing overall transaction volumes in non-essential segments. To sustain demand, many retailers are absorbing part of the tax impact or increasing promotional activity through discounts, bundle deals, and loyalty incentives, which further squeeze profit margins.
INDUSTRIAL
Malaysia's Industrial Production Index (IPI) recorded a stronger growth of 3.0% in June 2025, accelerating from 0.3% in May, underpinned by higher output in the manufacturing and electricity sectors, while mining continued to contract though at a much smaller pace. Manufacturing activity grew 3.6% compared to 2.8% in May, supported mainly by domestic-oriented industries which expanded 5.1%, driven by a sharp rise in food products (+11.3%), along with increases in basic metals (+6.7%) and motor vehicles (+3.4%).
