Malaysia has big dreams for Malacca, but will a new, mixed-use project sink under its own ambitions before it swims?
Melaka Gateway is the latest of Malaysia’s ambitious economic development projects—such as Iskandar Malaysia and the regeneration of Penang— aimed at furthering the country’s ambitions to attract global companies, property investors and well-heeled tourists.
Launched in February by Prime Minister Najib Razak, the 609-acre Melaka Gateway project will add three manmade isles alongside the existing, artificial Malacca Island. Upon completion, it will be the largest manmade island cluster in the region.
“Melaka Gateway is a groundbreaking and innovative tourism product that complements the government’s tourism ambitions,” Razak said at the launch. “This development is projected to attract an additional 2.5 million tourists over the next 12 years with high-yield consumers expected to contribute substantially to the tourism earnings of Malaysia.”
The USD 12.2 billion mixed-use project, which Malacca’s chief minister recently claimed “will be on par with Manhattan in New York,” will feature 12 zones comprising luxury hotels and resorts, a high-end retail district and Asia’s largest marina terminal, in addition to residential and commercial spaces.
Although the development is not due for completion until the final quarter of 2025, it will welcome the first visitors in 2018, with arrivals expected to hit 900,000 in the first year, according to master developer KAJ Development’s CEO Michelle Ong.
She added that the additional tourism would be a considerable boost to Malacca, which had approximately 14 million visitors last year. It is also expected to create about 15,000 jobs and contribute an estimated USD1.83 billion to Malacca State’s GDP.
“These are greenfield projects where we are able to plan infrastructure for the future and in line with current demand,” she said. “Every component has tourism as a primary driver, from the cruise ship terminal, luxury yachts in the marina, to the eco-isle, theme park and proposed Gateway Beacon Tower.”
The 288-metre tower, designed to be the development’s centrepiece, will house a “seven-star” hotel and luxury condominium units and has attracted considerable interest from an United Arab Emirates-based developer.
To date, KAJ has already locked down significant investment from five major overseas companies including Singapore-based TRE Development, Italy’s Skyye Group and Chinese firm Kasen International, which will develop hotels and condominiums worth USD580 million.
“We are open to global interest and are attempting to reach new markets… [such as]the Middle East and east Asia and while there has been much interest, our goal is to work with developers who fit into our masterplan,” Ong said. “We will only sign other developers as we progress towards the advanced stage and complete some of the infrastructure and utilities.”
Despite the fact most of Melaka Gateway’s residential elements remain in the preliminary stage, some analysts aree confident that the pipelined high-end condominium projects will attract foreign buyers, especially wealthy investors from Singapore, China and Hong Kong.
“Investors will not only be attracted by the facilities within the development, but also its close proximity to Malacca City and relatively cheap cost of living,” said Leo Kee Wah, senior executive of valuation and real estate at Henry Butcher Malaysia (Malacca). “It will also attract local Malaysian investors who are looking to add to their investment portfolio or buy a retirement property.”
Other market observers, however, are concerned about the sheer scale of the project and the time-consuming process of reclaiming land.
“The sites are still covered by water: they are yet to be reclaimed,” said Chan Seng Ching, Malacca branch manager of Rahim & Co Chartered Surveyors. “It might take years to complete the reclamation works and land settlement period.”
Moreover, Melaka Gateway is set to face an uphill battle luring investors from established destinations in the country as well as within the state.
“Major mixed-use projects on the mainland, including Hatten City, the 1,000 acre land plot owned by Oriental Group and Lion Group’s 40 acres of reclaimed land, located opposite the Melaka Gateway, are all ready for development,” he said. “Even with all of Melaka Gateway’s plus points, it is still going to face some great competition.”