Prices, rents of industrial space taper off

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Prices, rents of industrial space taper off

Third quarter sees first year-on-year drop in rentals since early 2010

Published on Oct 24, 2014 1:44 AM

By Dennis Chan, Deputy Money Editor


PRICES and rentals of industrial space kept moderating in tandem with occupancy rates in the third quarter after a rise in supply of industrial land and space by the Government in recent years.

Tender prices for industrial government land sale sites targeting multiple-user developments have also declined, said state industrial landlord JTC yesterday.

Indicies for industrial space and multiple-user rental fell by 1.8 per cent and 2.2 per cent respectively, quarter on quarter.

Year on year, those two indices declined by 1.3 per cent and 2.3 per cent respectively.

This is the first year-on-year drop in rentals since early 2010, in contrast to the average increase of about 8 per cent a year over the past four years, said JTC.

Prices of industrial space also kept stabilising, with the industrial space and multiple-user factory space price indices falling by 0.9 per cent and 1.8 per cent respectively, quarter on quarter.

These falls reverse their respective gains of 0.7 per cent and 2.5 per cent in the previous quarter.

Colliers International director of research and advisory Chia Siew Chuin said the fall in multiple-user factory prices is not surprising, given the subdued state of strata-titled industrial property sales amid a price standoff between buyers and sellers.

Year on year, the industrial space and multiple-user factory space price indices rose by 0.2 per cent and 3.4 per cent respectively, significantly slower than their average rises of about 16 per cent per year over the past four years.

After a 0.9 percentage point decline in the second quarter, the occupancy rate of the overall industrial property market edged up by 0.2 percentage point quarter on quarter to 90.9 per cent in the third quarter.

This was on the back of a 1 per cent rise in demand, outstripping a 0.8 per cent increase in supply.

The better occupancy rate was driven by the warehouse segment, mainly due to the take-up of a few new single-user warehouses.

For multiple-user factory space, the occupancy rate fell by 0.5 percentage point to 86.8 per cent, the lowest level since late 2007, as a 1.5 per cent increase in supply outstripped the 1 per cent increase in demand.

Year on year, the occupancy rate of the overall industrial property market slid 1.8 percentage points to 90.9 per cent.

For multiple-user factories, the occupancy rate fell by 3.3 percentage points to 86.8 per cent.

Looking ahead, about 1.2 million sq m of industrial space, including 167,000 sq m of multiple- user factory space, is set to come onstream this quarter, bringing the full year supply of industrial space to 3.1 million sq m.

A further 2.6 million sq m and 1.9 million sq m of industrial space is tipped to come onstream in 2015 and 2016 respectively.

This is significantly higher than the average annual supply and demand of about 1.4 million sq m and 900,000 sq m respectively in the past three years, and is likely to exert further downward pressure on occupancy rates, JTC noted.

The Government will keep monitoring the industrial property market closely to ensure that the diverse needs of industrialists are met, it added.

"Appropriate measures will also be introduced where necessary to promote a stable and sustainable industrial property market.

"JTC will also continue to develop more specialised and innovative facilities with productivity- enabling features such as shared facilities and services, to support the growth of key industry clusters and catalyse new ones in the coming years."

Ms Chia reckons sentiment is expected to remain mixed in the final quarter, given the uncertainties surrounding the global economic recovery.

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Industrial property prices, rents down in Q3

Bigger supply of space and state measures against speculation taking their toll, especially in factory segment

By Lynette Khoo

[email protected]@LynetteKhooBT

24 Oct


A RAMP-UP in supply of industrial space and anti-speculation measures have dented prices and rents in the third quarter, with the softness most pronounced in the factory space segment. And property consultants expect further downward pressure on factory occupancy and rental rates next year.

Data released by JTC on Thursday showed that industrial property prices slipped 0.9 per cent from the second quarter, weighed down by a 1.8 per cent drop in prices of multiple-user factory space.

This marked a reversal from their respective 0.7 per cent and 2.5 per cent rises in Q2.

Colliers International research director Chia Siew Chuin noted that a standoff between buyers and sellers for strata-titled industrial property has led to a fall in multiple-user factory prices.

Industrial rents dropped 1.8 per cent in Q3, despite a 0.2 percentage point increase in occupancy to 90.9 per cent. Compared to a year ago, rents fell 1.3 per cent - their first year-on-year fall since early 2010, according to JTC.

Rents for multiple-user factory space slipped 2.2 per cent from a quarter ago as the vacancy rate rose to 13.2 per cent from Q2's 12.7 per cent. At 86.8 per cent, the average occupancy rate is the lowest since the third quarter of 2007.

Bucking the trend, warehouse space prices rose 3.2 per cent while rents were unchanged from Q2.

Nicholas Mak, executive director at SLP International, expects overall industrial property prices this year to still mark a 2 per cent to 3.5 per cent rise - propped up by the 4.5 per cent gain in the first half of the year.

Overall industrial rents, which had already started to weaken in Q2, is likely to drop by 1.5 per cent to 3 per cent for the full year, he said.

Ms Chia noted that sentiment for industrial space remains mixed in the fourth quarter, "taking into consideration the presence of persistent downside risks, including the uncertainties surrounding the global economic recovery and the political unrest in Iraq, as well as the traditional year-end holiday lull".

Unless the price gap between buyers and sellers is bridged, sales of strata-titled industrial properties will remain slow, she said, though prices for properties with longer tenure could hold up better.

"Rents for higher specification properties, such as those located within the business parks and independent high-specification buildings, are expected to hold steady in Q4 2014 due mainly to a tightening in supply."

Since last year, JTC has introduced a string of measures to discourage speculation on industrial properties and address changing business needs. For instance, the assignment prohibition and minimum occupation periods were lengthened to ensure that industrialists are committed to the land that is allocated to them for productive economic activity for a reasonable period of time.

At the same time, JTC has ramped up supply of industrial space. Four industrial Government Land Sales (iGLS) sites totalling 7.4 hectares were awarded in the third quarter, and some 44.6 ha of prepared industrial land was allocated to end-users.

In the fourth quarter, some 1.2 million square metres of industrial space, including 167,000 sq m of multiple-user factory space, will come onstream - taking full-year supply to 3.1 million sq m.

Some 2.6 million sq m and 1.9 million sq m of industrial space is estimated to come onstream in 2015 and 2016 respectively.

JTC said: "This is significantly higher than the average annual supply and demand of around 1.4 million sq m and 900,000 sq m respectively in the past three years and is likely to exert further downward pressure on occupancy rates."

According to JTC, recent measures have already tamed tender prices for large iGLS sites targeting multiple-user developments.

JTC said that it would continue to monitor the market closely and introduce appropriate measures where necessary to promote a stable and sustainable market.

Mr Mak cautioned that regulations on the use of industrial space may be due for a review, given the changing economic landscape in Singapore and the oncoming industrial supply.

"One example is to be more flexible in the types of trades that are allowed to use industrial space. Currently, interior designers are allowed to use B1 factory space but architect firms are disallowed."

This, he believes, will "minimise a mismatch in supply and demand in the near future".