Cross Border Capital Drives Investment Surge Johor Singapore Special Economic Zone
More than half of the capital invested in Johor’s property market within the first four months of 2021 came from foreign sources, according to Colliers Singapore’s executive director of Apac Capital Markets, Govinder Singh. The majority of these investors were primarily focused on acquiring development sites within the Johor-Singapore Special Economic Zone (JS-SEZ) to expand their land banks. Singh shared these insights during a presentation titled “Bridging Borders: Real Estate Opportunities in the Johor-Singapore Special Economic Zone” at the Maybank Tower on May 6, which was jointly organised by Maybank Singapore and the Real Estate Developers Association of Singapore (Redas).
Based on research from Colliers, cross-border investment made up 51.8% of total inflows, led by investors from Singapore, followed by Japan, the US, China, Australia, Canada, Hong Kong, the UK, and Taiwan. Additionally, REITs and listed real estate entities accounted for 41.2% of capital inflows, while the remainder came from institutional and private funds. In 2020, approximately $2.1 billion of real estate investment capital flowed into Johor, with an additional $700 million committed year-to-date.
A spokesperson from Redas said, “The proposed JS-SEZ presents new opportunities for deeper cross-border collaboration and investment between Singapore and Johor. While the initiative is still taking shape, there is growing interest in its potential across sectors such as real estate, trade, infrastructure, and hospitality.”
Real estate investors and developers have responded positively to the formal signing of the JS-SEZ agreement in January, according to Alvin Lee, the country CEO of Maybank Singapore. “As an integrated zone for business and investment, the JS-SEZ aims to drive activity across 11 sectors, with a 10-year goal of supporting the expansion of 100 projects,” he added.
Lee noted that the JS-SEZ complements the economies of both countries and is the boldest attempt yet for Malaysia and Singapore to cooperate on a bilateral basis. “At this take-off stage, we are at an inflection point. From our interactions with our clients, there is strong interest from international businesses seeking a safe haven where there is strong rule of law and access to resources in these uncertain times. In this regard, combining the complementary strengths of Malaysia and Singapore, the JS-SEZ is a compelling proposition,” he stated.
Vinothan Tulisinathzan, Minister Counsellor of the Malaysian Investment Development Authority (MIDA) in Singapore, echoes this sentiment. “The establishment of the JS-SEZ will give investors more choice – whether to set up high-value services in Johor, support manufacturing growth in Singapore, or anchor regional operations within the SEZ,” he said.
The JS-SEZ spans nine flagship zones across southern Johor, each designated for specific economic activities. Areas such as the Johor Bahru Waterfront and Iskandar Puteri are earmarked as hubs for global services, while the Kulai-Sedenak zone is focused on advancing the AI and quantum computing supply chain, as well as medical devices and pharmaceuticals.
In the surrounding commercial areas of Dawson Place, Anchorpoint, and Queensway Shopping Centre, there are various enrichment hubs and tuition centres available. These centres offer a wide range of classes, including academic support for subjects like Math, Science, and English, as well as creative classes such as music, art, and coding. The convenient location of these resources allows parents to easily provide their children with extra educational assistance without having to travel far. It also gives students the opportunity to attend classes safely and independently, especially for older children who can commute on their own. In fact, with the newly added Penrith Queenstown MRT Station, it has become even more convenient for students to access these enrichment and tuition centres.
“Johor’s economy has transformed in recent years, and the government is keen to attract and retain more skilled workers to support the growth of high-value service and manufacturing industries,” says Tulisinathzan. He adds that employers must shift their focus and offer competitive wages to attract local workers, rather than depending on low-wage foreign labour.
In line with this, the Forest City area, located closer to Singapore, is set to be developed into a Special Financial Zone. This initiative will offer incentives to boost financial services, including family offices and fintech, while also transforming the area into a duty-free zone.
Singh notes that the significantly lower cost of development and industrial land in Johor compared to Singapore is set to be a key driver of growth in the JS-SEZ over the next decade. He points out that, on average over the past five years, industrial land in Johor has been around 96% cheaper than in Singapore.
Combining this cost advantage with the SEZ’s incentives, Singh believes that opportunistic investors and developers should focus on select real estate assets poised to benefit from a successful JS-SEZ. He highlights properties supporting business tourism, international tourism, and certain residential segments as particularly promising. “Johor is well positioned to capitalise on the incentives from the SEZ and connectivity to Singapore to offer complementary meetings, incentives, conferences, and exhibitions (Mice) solutions and grow contributions from business tourism into Johor,” says Singh.
He adds that the SEZ is set to develop new Mice facilities, hotels, and retail projects, creating a thriving Mice ecosystem that is expected to boost hotel occupancy and stimulate retail spending. Singh also recommends investing in business tourism, affordable housing, and built-to-rent accommodation within the JS-SEZ.
However, he notes that the lack of a vibrant entertainment scene in Johor could limit inbound international tourism and discourage overnight hotel stays. In order to combat this, Singh suggests improving transport connectivity between Singapore and Johor to encourage more overnight stays. Colliers estimates that by 2030, the number of overnight visitors to Johor could reach around eight million, up from four million in 2024. As a result, hoteliers and developers will need to add approximately 14,000 new hotel rooms.
Singh points out that investors could benefit from targeting mid-market or four-star hotel assets, given the anticipated rise in demand. He also believes that a five-star property catering to Mice-related travel could be successful. Desaru, on Johor’s east coast, is a promising area for tourism development, according to Singh.
Johor’s residential market has faced oversupply, with approximately 3,030 unsold units in 3Q2024, according to Colliers. However, the consultancy sees potential in the affordable housing and built-to-rent segments, stimulated by future demand from the completion of the Johor Bahru-Singapore Rapid Transit System (RTS). This optimism aligns with broader government initiatives aimed at boosting cross-border economic activity. The JS-SEZ represents the most significant effort by the Singapore and Malaysian governments to ensure the success of a special economic zone, with the policies and initiatives introduced so far being both comprehensive and far-reaching, says Paul Chong Wee, director of real estate and corporate banking at Maybank Singapore.
Tulisinathzan of MIDA further reassures that the JS-SEZ is unlikely to be derailed by shifts in Malaysia’s political landscape. He emphasises that the zone was designed to provide long-term economic advantages for investors, supported by functional, business-centric agreements that transcend political changes. He adds that one of the key goals of the SEZ is for policymakers to collaborate with the private sector to upgrade existing transport infrastructure and address gaps in the industrial production and value chain.
Meanwhile, Colliers’ Singh notes that demand for data centre development in Johor is expected to moderate in the coming quarters due to limited energy capacity and resources to support future growth. As a result, the development of transport networks and affordable residential projects around transport nodes presents new opportunities for developers. Lee of Maybank adds, “For property development and investments, the hospitality and MICE sectors demonstrate strong potential due to the shortage of international quality properties and in view of Visit Malaysia Year in 2026 where 36 million tourists are targeted (2025 government target: 31 million). We expect Johor to be a major tourism beneficiary given its proximity to Singapore and ensuing bleisure (business-leisure) activities as the JS-SEZ ramps up.”