http://www.businesstimes.com.sg/real...rther-analysts

Industrial property prices could fall further: analysts

By Renald Yeo

[email protected]

Jul 29, 2016


INDUSTRIAL rents and prices have fallen for the fifth straight quarter as headwinds on the manufacturing and economic fronts, coupled with uncertainty in the market and supply outstripping demand, took its toll on industrial property in Singapore.

The all-industrial rental index registered a 6.1 per cent year-on-year dip and fell 1.7 per cent on a quarterly basis, the latest statistics from JTC Corporation for the second quarter show.

Industrial property prices have also fallen 6.5 per cent y-o-y and 2.3 per cent q-o-q, bringing the price indices down to 2012 levels.

Vacancy rates rose by 0.7 percentage point to 10.6 per cent, reaching a level not seen in a decade.

While JTC said in its market report that the falling prices and rents translated to reduced business costs for industrialists, property consultants voiced caution over the uncertainty swirling about in the market from a prolonged slowdown in the beleaguered manufacturing sector.

The latest statistics for the manufacturing sector in Singapore released on Tuesday show that the republic's output has fallen 2.5 per cent on a seasonally adjusted month-on-month basis in June.

Employment in the manufacturing sector fell as well, and for the seventh consecutive quarter, with 3,400 fewer workers in June than in March, the latest statistics released on Thursday revealed.

And it seems that "Brexit" could add to the uncertainty. Said research director at Cushman & Wakefield Christine Li: "The manufacturing landscape here may be looking uncertain once again as . . . Brexit put many questions into the minds of consumers, corporates and investors alike."

"We expect occupancies . . . to continue rising amid record supply in the market," she added.

SLP International head of research Nicholas Mak, who noted that the demand for industrial space will remain soft, added: "Manufacturing and business services, especially real estate . . . could potentially have a more significant impact indirectly via exposure to the broader EU slowdown."

Yet a reprieve seems unlikely, and consensus among market watchers is that stabilisation is only likely to happen - at the earliest - by around 2018.

In the second half of this year, approximately 1.6 million sq m of industrial space is expected to be go on the market, JTC said.

It added that an expected two million sq m of industrial space will be available in 2017.

This contrasts with an average annual supply and demand - in the past three years - of approximately 1.8 million and 1.2 million sq m respectively, JTC said.

With the surplus, further pressure is expected to be exerted on occupancy rates, prices and rentals, it added.