Industrial rents may fall 7% to 10%: DBS Vickers

04:46 AM Dec 07, 2012

SINGAPORE - The Republic's industrial sector is near a tipping point, and rents are expected to decline 7 to 10 per cent over the next two years on rising vacancy rates, DBS Vickers said in a research report yesterday.

Lower completion of new industrial space over the last few years had resulted in record low vacancy levels and a strong surge in industrial capital values and rents since the start of this year.

However, DBS Vickers estimates that close to 49.7 million sq ft of industrial space under construction now will be completed over next year to 2015, which represents more than twice the annual supply over the last decade.

"As operating conditions get progressively tougher in the coming quarters, we believe that industrial landlords will likely see lower retention rates," it said, forecasting vacancy rates to rise by 4 to 5 percentage points over the two years.

DBS Vickers said its top pick among real estate investment trusts with exposure to the sector is Mapletree Logistics Trust.

Units of the trust, which owns logistic assets in Singapore and elsewhere in Asia including China and Japan, closed down 1.4 per cent at S$1.085 yesterday. But they have surged more than 30 per cent since the start of the year, broadly in line with the FTSE ST Real Estate Industrial Trust Index. Reuters