Published December 20, 2012

Tighter building rules on sites for industrial use

Govt has set aside 24.84 ha of land for the development of factory space

By Mindy Tan

[SINGAPORE] Tighter development measures are being introduced for certain industrial sites, even as the government rolls out more land in an attempt to moderate industrial land prices.

Specifically, successful bidders of selected sites will be required to build a minimum number of large factory units to cater to the needs of SMEs who need larger industrial spaces, said the Ministry of Trade and Industry (MTI).

This announcement came on the back of MTI announcing that a total of 22 sites - comprising 13 sites on the confirmed list and nine sites on the reserve list - with total site area of 24.84 hectares has been set aside for industrialists.

This is comparable to the 19 sites - 16 sites on the confirmed list and three on the reserve list which totalled 23.72 ha - released in the second half of this year. In 2012, a total of 47.69 ha of industrial land was released; this is about 1.4 times than that released last year.

The conditions encourage the development of industrial spaces that are more useful for genuine industrial space users, said Nicholas Mak, executive director, research and consultancy, at SLP International.

"Interestingly, all the 13 sites on the confirmed list are zoned B2. This further shows the government's intention to offer more supply for manufacturers and the heavier users of industrial space," he said.

Indeed, the driving reason for this could lie in the fact that the Tuas West Extension and the Thomson Line station locations are confirmed, making it the opportune time to encourage further development of the outlying areas (in which all the sites on the confirmed list are located), said Chia Siew Chuin, director of research and advisory at Colliers International.

"Furthermore, as there is already an ample supply of B1 industrial space, injecting B2 sites in the upcoming H1 2013 Confirmed List will ensure that a better balance is maintained," she said.

Of the 13 plots on the confirmed list, eight are less than 1.0 ha; six small sites (each less than 0.5 ha with a plot ratio of 1.0 and land tenure of 22 years) in Tuas South have also been released.

"There is an evident appetite for small sites by end-users, with land prices ranging from $30-78 per square foot per plot ratio (psf ppr). With total price quantum of below $10 million, these plots are sought-after by industrialists/manufacturing companies," she said.

Tenders for this type of land plot in the last six months have attracted five-19 bids per site. Specifically, plots 9 and 11 in Tuas South Street 8 were sold between $35 and $44 psf ppr in September. The top bid rose to $68-78 psf ppr for Plots 8 and 18 on the same street by December.

Ms Chia said that she expects all the sites on the confirmed list to be sold when launched for tender.

Lee Sze Teck, senior manager, training, research and consultancy, at DWG pointed out that the fall in supply of small plots on the confirmed list from 10 in H2 2012 to six in H1 2013 might suggest that the government is scaling back on supply of small sites which are especially targeted at small and medium-sized enterprises.

"The strong Singapore dollar and higher business costs have resulted in some industrialists moving their manufacturing operations to (Malaysia's) Iskandar region. Weighing all these factors, the government probably decided that there is lesser need to sell industrial landto SMEs. But should there be a need, SMEs can apply to trigger the sites on the reserve list for development," he said.

There are nine sites on the reserve list. Notably, five small sites (on Tuas South Street 6 and Street 8) have debut on the reserve list.

"Again, there is a degree of balance in the reserve list, as there are five small sites accompanied by four larger sites with a slightly longer tenure of 30 years. With the exception of the reserve list site on Tai Seng Street, all the other sites are in outlying areas," said Colliers' Ms Chia.