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02-05-14, 22:28
http://www.businesstimes.com.sg/archive/friday/premium/top-stories/moderating-prices-rents-industrial-space-offer-relief-20140425
Published April 25, 2014
Moderating prices, rents for industrial space offer relief
By lee meixian
[email protected] @LeeMeixianBT
[SINGAPORE] Businesses may not face more months of sharp increases in industrial prices and rents as a huge supply of completed industrial space - about six million square metres - comes onstream from now until 2016. While prices and rentals of industrial space continued to rise in the first quarter, the pace was significantly lower than the average annual increase in the past four years, according to data released by JTC Corporation yesterday.
The first quarter saw transaction prices of industrial space increase 3.8 per cent quarter on quarter and 2.5 per cent year on year, compared to an average annual growth of about 20 per cent in the last four years.
Industrial rentals rose 0.4 per cent quarter on quarter and 4.9 per cent year on year, compared to an average annual growth of about 10 per cent in the last four years.
The quarter saw occupancy rates of Singapore's industrial property market fall by 0.3 percentage points to 91.6 per cent from the previous quarter as supply outstripped demand.
At a briefing yesterday, the director of JTC's market planning division, Leong Hong Yew, said new supply of industrial space would bring a further decline in occupancy rates, which would help to rein in prices and rentals to a "more affordable, more competitive level".
The annual 2.1 million sq m of new industrial space planned for release each year is equivalent to about 4-5 per cent of the current available stock. It is about double the current average supply of 1.2 million sq m each year, and about triple the demand of 900,000 sq m in the past three years, JTC said.
However, some analysts feel this might not address the issue fully, or head-on.
SLP International research head Nicholas Mak said: "More space that comes onstream doesn't affect prices, but rentals. Prices depend on industrial land buyers; rentals depend on completed space and arrangements between landlords and tenants." For this reason, he expects overall average industrial price changes to stay range-bound between minus 3 per cent and plus 5 per cent year on year in 2014.
Colliers International's director of research and advisory, Chia Siew Chuin, suggested that it was not so much the absolute lack of space for end users, but rather the definition of what was permitted under the industrial usage and planning guidelines that should be addressed.
"Some businesses that fall within grey areas in the manufacturing chain such as product testing and design are not allowed to use certain industrial spaces. Singapore has progressed from low-cost parts assembly to high-value, high-tech manufacturing. Yet, the government's planning regulations have not progressed in tandem. Blindly ramping up supply could result in a situation where we have a lot of vacant space that is irrelevant to today's economy and unusable by end users."
Effective yesterday, JTC has also started to publish more transaction and rental information on its website to help industrialists make better purchase and rental decisions. Users can search down to the street or development level to find purchase and rental prices in the vicinity for transactions done in the past three years - for free.
Colliers' Ms Chia said the increased level of transparency would help end users sourcing for property for their business. "It won't have a direct impact on prices and rentals, but people would be able to do some homework on their own and transact based on knowledge and not just hearsay. Buyers and sellers, tenants and landlords, will be better able to negotiate with each other."
JTC also said it would continue releasing smaller land parcels averaging 0.5 hectares for industrialists to build their own customised facilities. Prices for these plots have stabilised to around $700-$750 per square metre per plot ratio (psm ppr), after hitting a high of about $1,000 psm ppr, Mr Leong said. More supply down the road will further moderate prices.
CBRE research head Desmond Sim said JTC was responding to market needs. "Our SMEs are not very land reliant and labour intensive. They require smaller plots to perform their functions through more micro machinery. With this, SMEs won't have to swallow something they can't chew. There will be good takers for these plots."
JTC's CEO, Png Cheong Boon, said yesterday the whole exercise of ramping up supply was to avoid any more "sharp spikes" in prices. "What industrialists want is certainty. They want to know what to expect, even if it means increasing prices, (at least) they know it's a gradual increase rather than a sudden increase that will destroy their projections. We are quite mindful of that."
Published April 25, 2014
Moderating prices, rents for industrial space offer relief
By lee meixian
[email protected] @LeeMeixianBT
[SINGAPORE] Businesses may not face more months of sharp increases in industrial prices and rents as a huge supply of completed industrial space - about six million square metres - comes onstream from now until 2016. While prices and rentals of industrial space continued to rise in the first quarter, the pace was significantly lower than the average annual increase in the past four years, according to data released by JTC Corporation yesterday.
The first quarter saw transaction prices of industrial space increase 3.8 per cent quarter on quarter and 2.5 per cent year on year, compared to an average annual growth of about 20 per cent in the last four years.
Industrial rentals rose 0.4 per cent quarter on quarter and 4.9 per cent year on year, compared to an average annual growth of about 10 per cent in the last four years.
The quarter saw occupancy rates of Singapore's industrial property market fall by 0.3 percentage points to 91.6 per cent from the previous quarter as supply outstripped demand.
At a briefing yesterday, the director of JTC's market planning division, Leong Hong Yew, said new supply of industrial space would bring a further decline in occupancy rates, which would help to rein in prices and rentals to a "more affordable, more competitive level".
The annual 2.1 million sq m of new industrial space planned for release each year is equivalent to about 4-5 per cent of the current available stock. It is about double the current average supply of 1.2 million sq m each year, and about triple the demand of 900,000 sq m in the past three years, JTC said.
However, some analysts feel this might not address the issue fully, or head-on.
SLP International research head Nicholas Mak said: "More space that comes onstream doesn't affect prices, but rentals. Prices depend on industrial land buyers; rentals depend on completed space and arrangements between landlords and tenants." For this reason, he expects overall average industrial price changes to stay range-bound between minus 3 per cent and plus 5 per cent year on year in 2014.
Colliers International's director of research and advisory, Chia Siew Chuin, suggested that it was not so much the absolute lack of space for end users, but rather the definition of what was permitted under the industrial usage and planning guidelines that should be addressed.
"Some businesses that fall within grey areas in the manufacturing chain such as product testing and design are not allowed to use certain industrial spaces. Singapore has progressed from low-cost parts assembly to high-value, high-tech manufacturing. Yet, the government's planning regulations have not progressed in tandem. Blindly ramping up supply could result in a situation where we have a lot of vacant space that is irrelevant to today's economy and unusable by end users."
Effective yesterday, JTC has also started to publish more transaction and rental information on its website to help industrialists make better purchase and rental decisions. Users can search down to the street or development level to find purchase and rental prices in the vicinity for transactions done in the past three years - for free.
Colliers' Ms Chia said the increased level of transparency would help end users sourcing for property for their business. "It won't have a direct impact on prices and rentals, but people would be able to do some homework on their own and transact based on knowledge and not just hearsay. Buyers and sellers, tenants and landlords, will be better able to negotiate with each other."
JTC also said it would continue releasing smaller land parcels averaging 0.5 hectares for industrialists to build their own customised facilities. Prices for these plots have stabilised to around $700-$750 per square metre per plot ratio (psm ppr), after hitting a high of about $1,000 psm ppr, Mr Leong said. More supply down the road will further moderate prices.
CBRE research head Desmond Sim said JTC was responding to market needs. "Our SMEs are not very land reliant and labour intensive. They require smaller plots to perform their functions through more micro machinery. With this, SMEs won't have to swallow something they can't chew. There will be good takers for these plots."
JTC's CEO, Png Cheong Boon, said yesterday the whole exercise of ramping up supply was to avoid any more "sharp spikes" in prices. "What industrialists want is certainty. They want to know what to expect, even if it means increasing prices, (at least) they know it's a gradual increase rather than a sudden increase that will destroy their projections. We are quite mindful of that."