Straits Times: Sat, Jul 28
PRICES in the sizzling industrial market continued to defy gravity in the second quarter, shooting up 8.4 per cent.
The hefty increase in the three months to June 30 came on the back of a sharp 7.3 per cent surge in the first three months of the year, while other sectors slowed.
Prices overall have rocketed 48 per cent since the start of last year, driven by continued investor interest and economic expansion.
Such robust numbers are raising concerns that the once-unglamourous sector is getting a bit too frothy, while smaller companies are complaining about rents going up on the back of higher valuations.
Industrial rents were up 2.8 per cent in the second quarter, adding to the 1.8 per cent increase in the previous three months, according to the Urban Redevelopment Authority yesterday.
It was a completely different picture on the commercial front, with prices and rents mostly flat or dipping slightly.
Office rents fell 0.5 per cent, while sale prices eased by 0.9 per cent. However, prices of shop spaces rose 0.7 per cent, although rents fell 0.3 per cent.
The hot spot these days is clearly in the industrial sector, with some eye-watering prices being recorded. Some units at freehold project AZ@Paya Lebar, for example, have been going for more than $1,000 per sq ft (psf).
Savills Singapore research head Alan Cheong expects industrial price gains to 'remain at elevated levels' for the rest of the year.
'Prices are pushing northwards as new high-tech firms such as game developers and social media companies enter the fray,' he noted.
'Occupiers in industrial estates like Defu, which is being redeveloped, are also beginning their move out to alternative locations.
'There is extreme fluidity in the market and, in the process, rentals will similarly be bootstrapped up.'
Colliers International research and advisory consultant Tay Huey Ying said low interest rates and cooling measures in the residential sector will continue to favour the strata-titled industrial market.
She expects prices and rents to continue increasing for the rest of the year, though at a slower pace.
Small and medium-sized enterprises do not need reminding of that.
Mr Thomas Pek, managing director of Tai Hua Food Industries, said the rent for his industrial facility at Jalan Besut went up 5.5 per cent in April, which came on top of other increases over the past few years.
'If rents keep increasing, we might have to move a portion of our business to Malaysia eventually,' he added.
'It's not something we want to do, but no one wants to make a loss. The high costs make it hard for us to be competitive.'
The trend cannot go on, according to one industrial developer, who said quarterly price gains of 7 per cent to 8 per cent are 'unsustainable'.
The developer, who declined to be named, added that the freehold industrial segment, in particular, might be in a bubble, given many projects like M38 at Jalan Pemimpin are setting benchmark prices and crossing the $1,000 psf mark.
There have been some government attempts to rein in prices.
The latest move came last month, when lease terms for industrial sites under the government land sales programme to be sold from now to December were capped at 30 years.
More sites of smaller size and shorter tenure will continue to be released to meet the demand of industrialists who might prefer to build their own facilities rather than rent.
A bumper supply of industrial sites has also been pushed out.
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