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30-01-14, 12:25
http://www.businesstimes.com.sg/archive/saturday/premium/top-stories/prices-rentals-industrial-space-q4-moderate-20140125
Published January 25, 2014
Prices, rentals of industrial space in Q4 moderate
By Jacquelyn Cheok [email protected]
PRICES and rentals of industrial space were found to have moderated in the fourth quarter of last year.
Observers expect this to carry on for the next few years, now that JTC Corporation plans to double the yearly average supply of industrial space to two million sq m between this year and 2016.
JTC Corp released the latest quarterly report on the industrial property market here yesterday, the first time it has done so since taking over the job of collecting and disseminating industrial property data from the Urban Redevelopment Authority (URA) last October.
Prices of industrial properties fell 3.3 per cent to 188 percentage points, reversing a 2.8 per cent gain in the previous quarter. Rentals moderated significantly, rising incrementally by only 0.2 per cent to 139.5 percentage points; last quarter, they rose by 4.4 per cent.
JTC Corp said that the bulk of the estimated yearly average supply of two million sq m of industrial space to come onstream in the next three years will come this year. This represents 4 to 5 per cent of current available stock, and is nearly twice the yearly average supply of one million sq m and demand of 900,000 sq m of industrial space in the past three years.
Tan Boon Leong, the executive director at Colliers International, told The Business Times: "The moderation of prices and rentals is likely to continue in the next few years. It is, after all, a concerted effort by the government to keep pricing low, so manufacturing companies, the backbone of the Singapore economy, won't be bogged down by high production costs."
But he added that the outlook will depend on the composition of the new supply of industrial land. He said it would be "worrisome" if a lot of it is B1-type space, as there is already a glut of this.
B1 spaces are light-use spaces deployed for functions such as warehousing, utilities and telecommunications, for which nuisance buffers greater than 50m are not required, say, by the National Environmental Agency.
There is, however, a big demand for B2-type space that can be met, he said, referring to heavy-use spaces for which nuisance buffers and those for health and safety are required. Activities requiring B2 spaces, for example, are the manufacture of industrial machinery and shipbuilding and repair.
Overall occupancy rates for Q4 2013 fell to 91.9 per cent, down 0.8 percentage points quarter-on-quarter. This came from a 1.5 per cent rise in supply outstripping a 0.6 per cent rise in demand for industrial space. For the whole of last year, occupancy rates slipped 1.1 percentage points to 91.9 per cent.
Nicholas Mak, the executive director of research and consultancy at SLP International Property Consultants, said: "It's not that demand has fallen, but that supply has simply increased much faster than demand has. Regardless, the net new demand for industrial space remains healthy, with 2.48 million sq ft of industrial space being taken up."
He noted that completed industrial buildings typically need half a year or more to be substantially occupied, because some tenants who are renting other spaces will need to wait until their existing leases expire before they move to new buildings; agents also need time to market the properties.
Mr Mak said: "The industrial market appears to be at an inflexion point, with prices and rentals softening, albeit quite moderately. The market also appears to be gradually developing into a two-tier one, comprising buildings with designs unsuitable for typical industrial use and those that are suitable. Therefore, the market is likely to undergo a period of adjustment."
Published January 25, 2014
Prices, rentals of industrial space in Q4 moderate
By Jacquelyn Cheok [email protected]
PRICES and rentals of industrial space were found to have moderated in the fourth quarter of last year.
Observers expect this to carry on for the next few years, now that JTC Corporation plans to double the yearly average supply of industrial space to two million sq m between this year and 2016.
JTC Corp released the latest quarterly report on the industrial property market here yesterday, the first time it has done so since taking over the job of collecting and disseminating industrial property data from the Urban Redevelopment Authority (URA) last October.
Prices of industrial properties fell 3.3 per cent to 188 percentage points, reversing a 2.8 per cent gain in the previous quarter. Rentals moderated significantly, rising incrementally by only 0.2 per cent to 139.5 percentage points; last quarter, they rose by 4.4 per cent.
JTC Corp said that the bulk of the estimated yearly average supply of two million sq m of industrial space to come onstream in the next three years will come this year. This represents 4 to 5 per cent of current available stock, and is nearly twice the yearly average supply of one million sq m and demand of 900,000 sq m of industrial space in the past three years.
Tan Boon Leong, the executive director at Colliers International, told The Business Times: "The moderation of prices and rentals is likely to continue in the next few years. It is, after all, a concerted effort by the government to keep pricing low, so manufacturing companies, the backbone of the Singapore economy, won't be bogged down by high production costs."
But he added that the outlook will depend on the composition of the new supply of industrial land. He said it would be "worrisome" if a lot of it is B1-type space, as there is already a glut of this.
B1 spaces are light-use spaces deployed for functions such as warehousing, utilities and telecommunications, for which nuisance buffers greater than 50m are not required, say, by the National Environmental Agency.
There is, however, a big demand for B2-type space that can be met, he said, referring to heavy-use spaces for which nuisance buffers and those for health and safety are required. Activities requiring B2 spaces, for example, are the manufacture of industrial machinery and shipbuilding and repair.
Overall occupancy rates for Q4 2013 fell to 91.9 per cent, down 0.8 percentage points quarter-on-quarter. This came from a 1.5 per cent rise in supply outstripping a 0.6 per cent rise in demand for industrial space. For the whole of last year, occupancy rates slipped 1.1 percentage points to 91.9 per cent.
Nicholas Mak, the executive director of research and consultancy at SLP International Property Consultants, said: "It's not that demand has fallen, but that supply has simply increased much faster than demand has. Regardless, the net new demand for industrial space remains healthy, with 2.48 million sq ft of industrial space being taken up."
He noted that completed industrial buildings typically need half a year or more to be substantially occupied, because some tenants who are renting other spaces will need to wait until their existing leases expire before they move to new buildings; agents also need time to market the properties.
Mr Mak said: "The industrial market appears to be at an inflexion point, with prices and rentals softening, albeit quite moderately. The market also appears to be gradually developing into a two-tier one, comprising buildings with designs unsuitable for typical industrial use and those that are suitable. Therefore, the market is likely to undergo a period of adjustment."