Wednesday, December 19, 2012

Industrial space rents hold steady this year

Dec 19, 2012
By Esther Teo Property Reporter

Rents for industrial space held firm this year while resale capital values surged despite a weak global economy which dampened the growth of the manufacturing sector in Singapore, a report said.

Average monthly gross rents for first-storey industrial space were unchanged at $2.15 per sq ft (psf) per month, while upper-storey rents held firm at $1.75psf in the fourth quarter of this year.

They remained constant when compared with the same period last year and with the third quarter of this year, a report by property consultancy DTZ noted.

Business park rents also remained steady at $4.35 psf per month in the fourth quarter and were only 3per cent below their previous peak in 2008, after a marginal dip of 0.7per cent in the first half of this year.

Ms Cheng Siow Ying, DTZ's executive director of business space, noted that the average occupancy rate for business park space hovered around 80per cent this year. This was lower than for other types of industrial space, which achieved occupancy rates of about 90per cent or more.

"This was partly attributable to the completions of UE BizHub East, One@Changi City and Infinite Studios, which added an estimated 1.2 million sq ft of business park space, with 50 per cent of the space already pre-committed.

"However, this is slightly lower than the past five-year annual average supply of 1.4 million sq ft," Ms Cheng noted.

Aided by improved demand from the biomedical, engineering, information technology and pharmaceutical sectors, business park rents declined only marginally this year. Sustained leasing activity in existing space also held up the market, DTZ said.

In contrast, capital values of resale industrial space surged, largely driven by investor demand in the current low-interest rate environment and ample liquidity.

Resale prices of first-storey industrial space rose 12per cent to $622 psf in the fourth quarter compared with a year ago. Purchases by firms also grew strongly, as industrialists bought units for their own use to achieve better control over costs and to escape rent fluctuations, DTZ said.

It added that tighter labour policies and the productivity drive to increase wages could see more firms relocating their businesses out of Singapore.

In addition, next year will see a higher-than-average supply of industrial space in the pipeline. However, against a backdrop of slow but still positive economic growth, industrial rents are expected to hold firm or ease slightly next year.

But price growth is expected to decelerate as prices have already risen 28 to 45 per cent since the last trough in 2009, said Ms Lee Lay Keng, DTZ's associate director of research.

A yearly average of 9.5 million sq ft of industrial space is expected to be completed between next year and 2016, in line with the yearly average supply of 10 million sq ft over the past 10 years.

However, the pipeline supply is uneven, with about 16 million sq ft of space expected to be completed next year, DTZ noted.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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