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29-12-15, 14:02
http://www.businesstimes.com.sg/real-estate/industrial-land-supply-for-h1-2016-at-8-year-low
Industrial land supply for H1 2016 at 8-year low
By Lynette Khoo
[email protected]
@LynetteKhooBT
Dec 29, 2015
http://www.businesstimes.com.sg/sites/default/files/styles/article_img/public/image/2015/12/29/76.jpg?itok=-jnfwiml
THE Singapore government has continued to moderate the supply of industrial land for the first half of 2016 in the face of a looming industrial space glut.
Marking an eight-year low, there will be six sites on the Confirmed List and four sites on the Reserve List with a total site area of 12.24 hectares under H1 2016 industrial government land sales programme (IGLS).
The last time the supply of industrial land sales was lower was H1 2008 IGLS, where a total of 9.28 hectares of land was released in the Confirmed and Reserve Lists, the Ministry of Trade and Industry (MTI) told BT.
Business 1 (B1) space for light industrial use is also starkly absent from the H1 2016 Confirmed List - a reflection of the oversupply situation being concentrated in the B1 space.
But some consultants were not particularly enthused by the 20-year lease terms of all six sites on the Confirmed List of the half-yearly IGLS - the second time in a row - since the government is seen to have weeded speculation out of the industrial property sector. SLP International executive director Nicholas Mak observed that the government tacitly trimmed the lease term from 30 years to 20 years, after slashing the lease term from 60 years to 30 years in mid-2012. "This is typically not a problem as most of these 20-year leasehold sites measure less than 1 hectare each and are meant for the end-user to purchase, rather than developers or investors," he added.
"However, the industrial property market and mortgage lenders are not entirely ready to embrace 20-year leasehold strata-titled space in new multiple-users developments," he said. In SLP's straw poll of the three local banks, only one of the three banks is ready to grant mortgages to buyers of new 20-year leasehold strata-units.
The MTI spokesman told BT on Monday that the launch of sites with a 20-year tenure aims to make them more affordable for industrialists to custom-build their own facilities.
While the amount of industrial land released under the H1 2016 Confirmed list is reduced to 4.04 hectares from 6.12 hectares in H2 2015, the amount of land in the Reserve List will remain unchanged at 8.20 hectares to give developers options.
"The government actively monitors the industrial property market, before deciding how much land to release through the IGLS programme," MTI spokesman said, adding that the government will also continue to release sites with appropriate tenures.
In an earlier bid to cool the rise in prices and rentals for industrial space, the government released an average of 42 hectares of industrial land per year between 2010 and 2014 - significantly higher than the average of around 28 hectares released in 2008 and 2009. Now that occupancy rates, prices and rentals have moderated, the government has changed tack.
The land released in 2015 was 48 per cent less than that in 2014, with 14.3 hectares of total site area available under the second-half 2015 IGLS and 14.08 hectares of site area under the first-half 2015 IGLS.
The six sites on the Confirmed List for H1 2016 are located at Tampines Industrial Drive (Plot 2 and 10), Tampines North Drive 3 (Plot 3), Woodlands Sector 2 and Tuas South Link 2 (Plot 7 and 8).
Except for the 1.37-hectare site in Woodlands Sector 2, the other five plots are all smaller than 1 hectare, making strata-division less feasible.
On the Reserve List, there are three 30-year leasehold sites ranging from 1.6 hectare to 3.33 hectares - in Woodlands Height, Tuas Bay Close, and Tuas South Link 1 (Plot 1).
The fourth site is a 20-year leasehold site at Tampines Industrial Drive (Plot 1). These sites are carried over from the Reserve List of the H2 2015 IGLS.
Tan Boon Leong, executive director of industrial services at Colliers International, noted that sites with more than 30 years of lease and spanning over 1 hectare in site area are likely to draw interest from speculators, while a 20-year site is "good enough for end-users".
"The government is hoping developers would not come in and bid too high," he said. "If the developer or purchaser thinks 20-year lease is too short, there are choices in the reserve list for 30-year leasehold sites to be triggered if there is perceived demand."
Comparing the price quantum of a 30-year site versus a 20-year site, Mr Tan estimates that the difference could be 9-10 per cent, which serves as a cost saving for the small and medium-sized enterprises.
Property consultants have warned that the industrial space market is set to enter a period of glut. Savills estimates that over the next five quarters with an influx of 40.4 million sq ft of factory and warehouse space. The north region saw the highest proportion of new and recently completed strata-titled projects, followed by the West region.
According to JTC third-quarter statistics, overall prices for industrial space fell by 0.3 per cent from a quarter ago as well as a year ago and overall rents for industrial space market slipped by 0.8 per cent compared to the previous quarter, and 1.6 per cent from the same period last year.
"The decline in price and rental indices contrast sharply with the average annual increases of around 8-9 per cent in prices and 3 per cent in rentals over the past four years," the MTI spokesman said.
There have been reportedly high vacancies at completed B1 developments such as Ark@Gambas in Sembawang, Oxley Bizhub 1 and 2 in Tai Seng, and in B2 (clean and light) industrial development Eco-Tech@Sunview. New launches of B1 projects this year such as Far East's Nordcom II in Woodlands and NSS Group's Proxima@Gambas were also met with slow sales.
But B2 units fare better. Wee Hur's Mega@Woodlands already sold over 50 units ahead of an official launch, of which some 80 per cent of units sold are B2 units. For Ace@Buroh B2 development, which is going to obtain temporary occupation permit (TOP) soon, it moved some 65 per cent of total units over the last four months to achieve a strong 90 per cent take-up rate.
As at the end of the third-quarter, there were around 2,300 industrial units, totalling 657,000 square metres, in uncompleted strata-titled developments still available for sale and about 56 per cent of them were B1 spaces, Mr Mak pointed out.
"The reduction in the industrial property supply and not putting any B1 sites in the Confirmed List will allow the real estate market more time to absorb the existing supply of industrial space currently in the market."
Industrial land supply for H1 2016 at 8-year low
By Lynette Khoo
[email protected]
@LynetteKhooBT
Dec 29, 2015
http://www.businesstimes.com.sg/sites/default/files/styles/article_img/public/image/2015/12/29/76.jpg?itok=-jnfwiml
THE Singapore government has continued to moderate the supply of industrial land for the first half of 2016 in the face of a looming industrial space glut.
Marking an eight-year low, there will be six sites on the Confirmed List and four sites on the Reserve List with a total site area of 12.24 hectares under H1 2016 industrial government land sales programme (IGLS).
The last time the supply of industrial land sales was lower was H1 2008 IGLS, where a total of 9.28 hectares of land was released in the Confirmed and Reserve Lists, the Ministry of Trade and Industry (MTI) told BT.
Business 1 (B1) space for light industrial use is also starkly absent from the H1 2016 Confirmed List - a reflection of the oversupply situation being concentrated in the B1 space.
But some consultants were not particularly enthused by the 20-year lease terms of all six sites on the Confirmed List of the half-yearly IGLS - the second time in a row - since the government is seen to have weeded speculation out of the industrial property sector. SLP International executive director Nicholas Mak observed that the government tacitly trimmed the lease term from 30 years to 20 years, after slashing the lease term from 60 years to 30 years in mid-2012. "This is typically not a problem as most of these 20-year leasehold sites measure less than 1 hectare each and are meant for the end-user to purchase, rather than developers or investors," he added.
"However, the industrial property market and mortgage lenders are not entirely ready to embrace 20-year leasehold strata-titled space in new multiple-users developments," he said. In SLP's straw poll of the three local banks, only one of the three banks is ready to grant mortgages to buyers of new 20-year leasehold strata-units.
The MTI spokesman told BT on Monday that the launch of sites with a 20-year tenure aims to make them more affordable for industrialists to custom-build their own facilities.
While the amount of industrial land released under the H1 2016 Confirmed list is reduced to 4.04 hectares from 6.12 hectares in H2 2015, the amount of land in the Reserve List will remain unchanged at 8.20 hectares to give developers options.
"The government actively monitors the industrial property market, before deciding how much land to release through the IGLS programme," MTI spokesman said, adding that the government will also continue to release sites with appropriate tenures.
In an earlier bid to cool the rise in prices and rentals for industrial space, the government released an average of 42 hectares of industrial land per year between 2010 and 2014 - significantly higher than the average of around 28 hectares released in 2008 and 2009. Now that occupancy rates, prices and rentals have moderated, the government has changed tack.
The land released in 2015 was 48 per cent less than that in 2014, with 14.3 hectares of total site area available under the second-half 2015 IGLS and 14.08 hectares of site area under the first-half 2015 IGLS.
The six sites on the Confirmed List for H1 2016 are located at Tampines Industrial Drive (Plot 2 and 10), Tampines North Drive 3 (Plot 3), Woodlands Sector 2 and Tuas South Link 2 (Plot 7 and 8).
Except for the 1.37-hectare site in Woodlands Sector 2, the other five plots are all smaller than 1 hectare, making strata-division less feasible.
On the Reserve List, there are three 30-year leasehold sites ranging from 1.6 hectare to 3.33 hectares - in Woodlands Height, Tuas Bay Close, and Tuas South Link 1 (Plot 1).
The fourth site is a 20-year leasehold site at Tampines Industrial Drive (Plot 1). These sites are carried over from the Reserve List of the H2 2015 IGLS.
Tan Boon Leong, executive director of industrial services at Colliers International, noted that sites with more than 30 years of lease and spanning over 1 hectare in site area are likely to draw interest from speculators, while a 20-year site is "good enough for end-users".
"The government is hoping developers would not come in and bid too high," he said. "If the developer or purchaser thinks 20-year lease is too short, there are choices in the reserve list for 30-year leasehold sites to be triggered if there is perceived demand."
Comparing the price quantum of a 30-year site versus a 20-year site, Mr Tan estimates that the difference could be 9-10 per cent, which serves as a cost saving for the small and medium-sized enterprises.
Property consultants have warned that the industrial space market is set to enter a period of glut. Savills estimates that over the next five quarters with an influx of 40.4 million sq ft of factory and warehouse space. The north region saw the highest proportion of new and recently completed strata-titled projects, followed by the West region.
According to JTC third-quarter statistics, overall prices for industrial space fell by 0.3 per cent from a quarter ago as well as a year ago and overall rents for industrial space market slipped by 0.8 per cent compared to the previous quarter, and 1.6 per cent from the same period last year.
"The decline in price and rental indices contrast sharply with the average annual increases of around 8-9 per cent in prices and 3 per cent in rentals over the past four years," the MTI spokesman said.
There have been reportedly high vacancies at completed B1 developments such as Ark@Gambas in Sembawang, Oxley Bizhub 1 and 2 in Tai Seng, and in B2 (clean and light) industrial development Eco-Tech@Sunview. New launches of B1 projects this year such as Far East's Nordcom II in Woodlands and NSS Group's Proxima@Gambas were also met with slow sales.
But B2 units fare better. Wee Hur's Mega@Woodlands already sold over 50 units ahead of an official launch, of which some 80 per cent of units sold are B2 units. For Ace@Buroh B2 development, which is going to obtain temporary occupation permit (TOP) soon, it moved some 65 per cent of total units over the last four months to achieve a strong 90 per cent take-up rate.
As at the end of the third-quarter, there were around 2,300 industrial units, totalling 657,000 square metres, in uncompleted strata-titled developments still available for sale and about 56 per cent of them were B1 spaces, Mr Mak pointed out.
"The reduction in the industrial property supply and not putting any B1 sites in the Confirmed List will allow the real estate market more time to absorb the existing supply of industrial space currently in the market."