Industrial property market in doldrums

JUL 28, 2017

Lee Xin En

Industrial output registered a healthy year-on-year growth of 13.1 per cent last month but patchy growth across segments has left the sluggish industrial property market in the doldrums.

Industrial rents fell by 0.8 per cent from the first three months of the year to the second quarter this year. Prices declined by 1.6 per cent over the same period, according to JTC data yesterday.

Mr Desmond Sim, head of CBRE Research, Singapore and South- east Asia, said that demand was largely made up of renewals and relocations.

"A combination of supply overhang and lacklustre demand continues to exert downward pressure on rents for most industrial property segments," he noted.

"However, we continued to see active leasing enquiries, particularly from high-value manufacturing firms in the precision engineering and electronics sectors, and those with rising inventory requirements such as e-commerce and logistics players."

The occupancy rate for industrial property was 88.7 per cent for the second quarter, down from 89.4 per cent for the first three months of this year.

Single-user factories were most acutely hit, with prices down 10.6 per cent compared with the same period last year, while rents were down 3.8 per cent from last year.

However, the segment had a slight reprieve as rents inched up 0.2 per cent for the second quarter after six consecutive quarters of decline, said Ms Christine Li, director of research at Cushman & Wakefield.

However, she noted that there was an acute supply issue looming: "Approximately 7.3 million sq ft of single-user factories space will enter the market in the second half of this year alone, which is much higher than the 4.9 million sq ft of annual average demand over the last 10 years."

The business park segment was a silver lining, with rents edging up 2.1 per cent in the second quarter from the first. Occupancy rates also improved from 84 per cent in the first quarter to 85.7 per cent for the second.

Ms Li said that with limited business park supply in the near term, rents are expected to improve over the next few quarters.