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11-12-14, 16:00
http://www.straitstimes.com/archive/saturday/premium/money/story/industrial-property-still-good-investment-20141206
Industrial property 'still a good investment'
Experts point to smaller capital outlay and higher rental yields
Published on Dec 6, 2014 12:42 AM
By Rennie Whang
PROPERTY experts have broadly welcomed recent clarifications on industrial property use and say industrial units still represent a potentially attractive investment.
Some investors have been put off industrial property after the seller's stamp duty (SSD) came in last year and the halving two years ago of the maximum tenure for industrial sites to 30 years.
But the numbers still stack up well for industrial units.
Compared with other property, industrial units require a smaller capital outlay. Rental yields are also higher, from 4 per cent for freehold property to 8 per cent or 9 per cent for shorter-tenure property, said Mr Tan Boon Leong, executive director of industrial services at Colliers International.
New guidelines drawn up by the Urban Redevelopment Authority, Ministry of Trade and Industry and economic agencies last week have pros and cons for investors, the experts said.
In one change, commercial businesses such as mini-marts and fitness centres may operate out of industrial buildings in "outlying" estates, including Kranji and Sungei Kadut in the north, and Tuas and Pioneer out west.
Projects with these amenities will be better able to attract tenants. "Investors of strata factories in these projects will have better value propositions," said Mr Ong Kah Seng, R'ST Research director.
Another change clarifies e-business and media uses at industrial developments.
There have been "quite a few grey areas" over what activities qualify under current Business 1 (B1) and Business 2 (B2) usage, said Mr Lim Kien Kim, executive director and head of industrial at Knight Frank Singapore. B1 developments are suitable for lighter industries, compared with B2 ones.
But buyers could see their tenant base shrink, as businesses in "non-core" media activities, including marketing, distributing and aggregating digital content, are now no longer allowed in industrial developments.
"Tenant demand should still stay strong, but may gear towards conventional industrialists who would have tighter rental budgets," said Mr Ong.
Investors tend to prefer B1-use factories to B2 ones. Some B1 developments have a "pseudo-office feel" with swimming pools and gyms, said Mr Tan.
He noted that a typical 30-year leasehold industrial unit - whether B1 or B2 - could be $450,000 to $550,000 for 1,600 to 1,800 sq ft of space. Assuming an 80 per cent loan, the initial outlay could be about $100,000 - less than other types of property.
The price increase of multiple-user factories has slowed since the imposition of the SSD in January last year, levied on those who dispose of units within three years of purchase. Prices rose by 4.6 per cent in the first nine months of this year and 3.2 per cent for the whole of last year. In 2012, prices rose by 24.5 per cent.
Rents declined by 0.9 per cent in the first nine months of this year, after rising 3.5 per cent last year and 9.7 per cent in 2012.
Overall, the Government is expected to pare back industrial supply, said Mr Tan, who expects prices and rents to remain flat next year.
Larger industrial projects are coming up in the north, including Ark@Gambas by HLS Development which obtained its temporary occupation permit recently, and Nordcom One by Far East Organization, launched in July and also in Gambas.
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Industrial property 'still a good investment'
Experts point to smaller capital outlay and higher rental yields
Published on Dec 6, 2014 12:42 AM
By Rennie Whang
PROPERTY experts have broadly welcomed recent clarifications on industrial property use and say industrial units still represent a potentially attractive investment.
Some investors have been put off industrial property after the seller's stamp duty (SSD) came in last year and the halving two years ago of the maximum tenure for industrial sites to 30 years.
But the numbers still stack up well for industrial units.
Compared with other property, industrial units require a smaller capital outlay. Rental yields are also higher, from 4 per cent for freehold property to 8 per cent or 9 per cent for shorter-tenure property, said Mr Tan Boon Leong, executive director of industrial services at Colliers International.
New guidelines drawn up by the Urban Redevelopment Authority, Ministry of Trade and Industry and economic agencies last week have pros and cons for investors, the experts said.
In one change, commercial businesses such as mini-marts and fitness centres may operate out of industrial buildings in "outlying" estates, including Kranji and Sungei Kadut in the north, and Tuas and Pioneer out west.
Projects with these amenities will be better able to attract tenants. "Investors of strata factories in these projects will have better value propositions," said Mr Ong Kah Seng, R'ST Research director.
Another change clarifies e-business and media uses at industrial developments.
There have been "quite a few grey areas" over what activities qualify under current Business 1 (B1) and Business 2 (B2) usage, said Mr Lim Kien Kim, executive director and head of industrial at Knight Frank Singapore. B1 developments are suitable for lighter industries, compared with B2 ones.
But buyers could see their tenant base shrink, as businesses in "non-core" media activities, including marketing, distributing and aggregating digital content, are now no longer allowed in industrial developments.
"Tenant demand should still stay strong, but may gear towards conventional industrialists who would have tighter rental budgets," said Mr Ong.
Investors tend to prefer B1-use factories to B2 ones. Some B1 developments have a "pseudo-office feel" with swimming pools and gyms, said Mr Tan.
He noted that a typical 30-year leasehold industrial unit - whether B1 or B2 - could be $450,000 to $550,000 for 1,600 to 1,800 sq ft of space. Assuming an 80 per cent loan, the initial outlay could be about $100,000 - less than other types of property.
The price increase of multiple-user factories has slowed since the imposition of the SSD in January last year, levied on those who dispose of units within three years of purchase. Prices rose by 4.6 per cent in the first nine months of this year and 3.2 per cent for the whole of last year. In 2012, prices rose by 24.5 per cent.
Rents declined by 0.9 per cent in the first nine months of this year, after rising 3.5 per cent last year and 9.7 per cent in 2012.
Overall, the Government is expected to pare back industrial supply, said Mr Tan, who expects prices and rents to remain flat next year.
Larger industrial projects are coming up in the north, including Ark@Gambas by HLS Development which obtained its temporary occupation permit recently, and Nordcom One by Far East Organization, launched in July and also in Gambas.
[email protected]