Construction activities are derived from local economic activities. The volatile global economy between 2008 and 2009 constituted an overall decline in revenue stream in Malaysia's building construction market. Nevertheless, construction activities related to social, community and environmental infrastructure such as municipal water and wastewater treatment plants remain conducive.
Changing demographics, such as an annual population growth of about 2 percent, migration (under the Malaysia My Second Home Program) and socioeconomic growth, are resulting in the building construction market expansion, as these changes increase demand for new buildings and refurbishment of existing ones.
In Malaysia, construction of commercial and residential buildings contributed to between 40 and 55 percent of the total construction market between 2006 and 2009. The market revenues for building construction reached approximately US$7.21 billion in 2008 and $6.67 billion in 2009, and it will potentially hit the $9-billion mark by 2015. While the overall building construction market plummeted in 2008 and registered low growth in 2009, few nonresidential building construction segments are expected to grow in 2010, catalyzed by projects in tourism, education and health care.
About 55 to 60 percent of the building construction market was accredited to nonresidential construction in terms of revenues and number of projects in 2008 and 2009, while the remaining market was made up by residential buildings. The growth of nonresidential building construction seemed to be able to traverse better than the residential building segment during the economic downtime. Frost & Sullivan finds that the revenue growth of nonresidential building construction is higher than residential building construction by 3 to 5 percent annually until 2015. Additionally, the growth trend of the former segment in recent years of economic volatility suggested that it performed better than the residential building segment.
It is expected that the overall building construction market will be further elevated by the impending 10th Malaysia Plan (2011 to 2015). Development expenditure by the government of Malaysia is expected to be $67.8 billion (approximately 230 billion in Malaysian Ringgits). The government has also expressed interest in more involvements from the private sector and investors to engage in public projects, such as construction and management of schools, hospitals and other community infrastructure.
Tourism on the Rise
Malaysia has had a rapidly growing tourism industry, with high revenues of $14.16 billion in 2008, and it was expected to grow to $14.87 billion in 2009 — an increase of 5 percent. The growth of ecotourism and agritourism is encouraging the government to invest more in the new construction and refurbishment of hotels, resorts, shopping areas, holiday camps and recreational projects.
To further boost the country's health care tourism, the government recently announced the provision of tax exemption equivalent to 100 percent of qualifying capital expenditure incurred for the first five years for the construction of new hospitals, or expansion, modernization or refurbishment of existing health care centers. The tax exemption application period is between 2010 and 2014.
Prospects in Building Construction
The Malaysian building construction market is highly competitive, with most of the leading contractors, architects and building material suppliers located in and around the Klang Valley. The market is led by publicly listed, local contractors and developers, while foreign participation is encouraged in areas where local expertise may be scarce, such as technologies in prefabrication practices and green, smart and energy-efficient buildings.
With the introduction and launching of its own green building assessment tool in the middle of 2009 — the Green Building Index — Malaysia is now on the green roadmap, with forthcoming assessment of environmental impacts of buildings and provision of guidelines for new buildings. Further development on the index is expected to take place in forthcoming years, and this bodes well for players in energy efficiency, indoor environment quality, site management, materials and water efficiency.
To embrace green technology, the government had allocated $6.1 million in its 2010 budget to intensify green-awareness activities and to encourage the practice of environment-friendly lifestyle. This also includes prioritization on environment-friendly products and services that comply with green standards in government procurement of goods and services.
Additionally, suppliers of green technologies in the building construction space should take advantage of the government's $455-million soft loans to companies that supply and use green technologies. The maximum for suppliers is $15 million. These green loans have been made available since January, and can be applied at the National Green Technology Centre.
The design of energy-efficient buildings has become a major issue. The government has launched several initiatives to enhance the adoption of energy-efficient designs. These initiatives encompass regulations, incentives, campaigns and the establishment of Energy Commission (a corporate body under the Energy Commission Act 2001 or Act 610). Energy-efficient design elements — passive (building orientation and natural-air ventilation) and active (HVAC and lighting control systems, energy efficient appliances and energy management systems) — are also being promoted, to be incorporated into construction projects in Malaysia.
Based on current trends, energy will become increasingly more expensive, and as Malaysia is likely to become a net importer of energy after 2010, energy standards and implementations will definitely become mandatory.
Impacts on Building Technologies
The positive growth of building construction in Malaysia is benefiting other related industries, especially those in integrated facilities management (IFM), building automation (BA), lighting and HVAC.
IFM is becoming popular in Malaysia, with an increase of about 15- to 20-percent market revenue in 2008 and 2009. This is attributed to the increasing awareness of the benefits of IFM among building owners and property developers. Most of this demand comes from the nonresidential sector, accounting for about 60 percent of total demand. The market is currently dominated by foreign IFM providers. However, this trend is changing as the number of local participants is increasing with increasing demand.
Smart buildings are gradually gaining acceptance in building construction, representing a huge potential for growth in the BA market. This growth is also fostered by the increasing number of local BA system suppliers, although the market is currently dominated by international system integrators. With further proliferation of smart or intelligent buildings and the national energy savings campaign, the BA market is to witness more opportunities.
Adoption of energy-efficient buildings requires the lighting industry to design innovative lighting control systems which ensure efficient use of energy. Government agencies are increasingly relying on energy efficient lighting fixtures such as fluorescent fittings (T5), LED fittings and metal halide floodlights. Currently, there are no regulations; however, the government is aggressively campaigning for the use of energy-efficient lighting fixtures on both new and old buildings. Additionally, Pusat Tenaga Malaysia (national energy research body) expects that more energy-efficient lighting fixtures will be made available in the country with competitive prices and find their way to residential building projects.
The HVAC market has been growing between 6 to 7 percent annually, boosted by increasing usage of air-conditioning units and electronic air cleaners. Energy efficiency principle is currently applied in modern air-conditioning units, with more improvements expected. Currently, it is common to have HVAC systems use carbon dioxide sensors and heat recovery wheels to reduce cooling load of fresh air intake.
2008 to 2009 has been a challenging year for building construction, but the Malaysian market remained stable. Demand for new commercial and industrial buildings remains sturdy, while new constructions of institutional buildings such as schools and hospitals are almost consistent with the government's education and health care policies.
Despite the seemingly challenging times, segments such as lighting, HVAC and BA have enjoyed stable revenue streams from the supply of systems and products for building-retrofitting activities and after-sales services. The IFM market experienced growth as building owners saw the benefits in outsourcing the maintenance of buildings. IFM services are usually associated with operation cost improvements.
The building construction market is expected to improve in 2010 with positive growth, before gaining full momentum in 2011. Success largely depends on participants' ability to integrate solutions including green and energy-efficient concepts, financial strengths, skilled workforce and technology deployment. Currently, such expertise in service integration is sorely lacking. This is a huge handicap at a time when new buildings are being built and automated using green concepts.