Friday, February 8, 2013

Colliers urges urgent relook at industrial sites

As the manufacturing sector modernises into a technology-based, high-value-added engine of the economy, Singapore's industrial real estate too must evolve

The Business Times - February 8, 2013

[SINGAPORE] As the manufacturing sector modernises into a technology-based, high-value-added engine of the economy, Singapore's industrial real estate too must evolve.

Specifically, urban planners must re-examine land- use zonings, usage definitions, planning parameters, plot ratio norms and regulations, says Colliers International in its White Paper titled: "Come 2030, will there be suitable space for small and medium businesses?"

The present tensions, evidenced in companies not knowing if their activities fall within the definition of "Business 1" - B1 zoning is usually intended for light and clean industrial uses that do not impose a "nuisance buffer" of more than 50 metres - is due to the outmoded definition of manufacturing.

Given that small and medium-sized enterprises (SMEs) are often sub-contractors to multinational corporations, specialising in one or two aspects of an MNC's overall production process, it is erroneous to consider SME operations as a standalone process that does not amount to the production of a good, argued the report's authors.

"If the SMEs specialise in one part of the entire complicated manufacturing process, are they to be denied industrial real estate occupation just because technology has removed the traditional physical production activity associated with industries of the past?" they questioned.

That businesses which are unable to find adequate office premises are pushed to take their chances in B1 space can be attributed to land resources not being effectively aligned to actual demand.

Since the 1980s, there has been more industrial development from Government Land Sales (GLS) parcels sold compared to office development - 134 industrial sites (about 83.2 million square feet gross floor area or GFA) versus 90 commercial/white GLS sites with significant office component (about 29.6 million sq ft GFA). Of this, there are more strata-subdivided industrial units (58.4 per cent, or about 48.6 million sq ft GFA) when contrasted with strata-titled office stock (14.9 per cent, or about 4.4 million sq ft GFA).

Since 2004, when the B1 zoning was introduced, 12.5 million sq ft of strata industrial GFA was made available, while an estimated 4.3 million sq ft of strata office GFA was provided.

That businesses cannot find adequate and cost-effective office premises could stem from this lack of suitable office accommodation targeting them.

To alleviate the supply crunch, the government should consider creating and facilitating new supply of office space in non-central locations if it chooses not to update the B1 definition, said Colliers.

For instance, land in non-central areas could be released for no-frills office development, similar to the commercial buildings built by the Housing and Development Board in the 1980s.

While such developments would have a marginally higher occupation cost compared to B1 space in industrial areas, they would be more affordable than office skyscrapers.

The government could further stipulate that selected sites be developed and sold as strata-titled units, offering companies the choice to buy, and developers the option to retain their completed development for recurring rental income.

"The Land Use Plan offers a myriad of opportunities to do this, as commercial space outside the city could grow to at least 13 million square metres," pointed out Colliers.

Alternatively, a hybrid definition of industrial-office can be considered. This definition describes a land-use category in Hong Kong for companies that need an administrative/ managerial base to coordinate the production activities of factories in mainland China.

As a stop-gap solution to house displaced businesses that have been evicted due to being "unauthorised" B1 space users, facilities held by the Singapore Land Authority - which were made available for rent during an office supply crunch in 2007 - could potentially be made available to SMEs on a cost-competitive basis, providing an immediate basic use for buildings that are presently underutilised, added Colliers.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

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