Sunday, April 29, 2012

Industrial units buck trend

Straits Times: Sat, Apr 28
PRICES of factory and warehouse space have defied the slowing real estate market to shoot up 7.3 per cent in the first quarter, almost double the pace of gains in the previous three months.

Rents were also up, gaining 1.8 per cent compared with the 0.4 per cent increase in the last quarter of 2011.

The robust numbers are in contrast to the residential and commercial sectors where prices and rents have either dropped or are flatlining.

Industrial prices are now 35 per cent above the peaks hit in the third quarter of 2008 and are close to 15-year highs, noted Colliers research and advisory director Chia Siew Chuin.

The fast pace of growth in this once-overlooked sector comes on the back of strong demand from end-users and investors keen on capital gains and high yields.

Industrial prices are also responding to the continuing interest in the sector from investors deterred by a slew of residential cooling measures.

Prices of shoebox industrial units - some as small as 50 sq m to 80 sq m - in particular have set benchmark prices over the past year, say experts.

Savills Singapore research head Alan Cheong cautioned that industrial prices appeared 'speculative' as they skyrocketed 26 per cent compared to a year ago, while rents surged 10.6 per cent. He said rising prices, which are being driven by liquidity flows in the market, low interest rates and residential cooling measures, will eventually compress yields.

But Colliers' Ms Chia also pointed to the recent tightening of development guidelines for industrial sites acquired through the government land sales programme as fuelling industrial demand.

One rule prohibits new developments from being subdivided into strata units within 10 years from the issue of the temporary occupation permit. The rule applies to selected sites near MRT stations and those decided by the Government.

There is also a minimum size of 1,615 sq ft imposed on strata-titled units and units in multi-user industrial developments. '(These) provided a temporary boon to the industrial property sales market, as some buyers brought forward their purchasing plan of new strata industrial units near MRT stations or new small-format industrial units before the supply becomes limited,' she said.

Businesses clearly remain positive about prospects despite the economic uncertainty, given that the net new industrial space leased hit a seven-quarter high of 2.98 million sq ft in the first quarter.

Rents were supported by relatively healthy occupancy rates of 93.5 per cent in the first quarter, according to the Urban Redevelopment Authority yesterday.

In sharp contrast to the industrial figures, private home prices dipped 0.1 per cent in the first quarter - the first fall in almost three years...
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Martin Koh/ Sherry Tang
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