Saturday, February 9, 2013

Strong demand for industrial sites; bids at top of forecasts

Strong demand for industrial sites; bids at top of forecasts
With speculators out of the picture, tender shows SMEs' appetite

Business Times - FEBRUARY 09, 2013

Three industrial sites drew bids on the top end of expectations, reflecting continued strong demand, even as the speculative element has been sieved out.

This could reflect the hunger of small and medium enterprises (SMEs), said Desmond Sim, associate director of CBRE Research.

"The number of bids received for each site is a yardstick of how receptive and hungry some of these SMEs are ... (What we are seeing) is more or less genuine demand, either to be a landlord by procuring a place for income purposes, or for owner-occupancy," said Mr Sim.

Ong Kah Seng, director at R'ST Research, noted that while the recently introduced sellers' stamp duty has sieved out speculators, the asset class still has strong investment underpinnings.

"Even if speculators are out of the picture, investors are unlikely to be deterred; they may continue to be interested as it is a good source to park their money in a low interest rate environment," he said.

The first site, a 3.96-hectare plot with a 30-year tenure and maximum gross plot ratio (GPR) of 1.4, drew a top bid of $61 million, or $102.18 per square foot per plot ratio (psf ppr) from Soon Hock Group. When the site was launched in December last year, analysts said it could potentially draw a top bid of $50-$95 psf ppr.

The top bid beat OKH Holdings's bid of $48.3 million ($80.89 psf ppr) by 26.3 per cent.

Soon Hock could be looking to develop a logistics warehouse to cater to the ports which are slated to move to Tuas, said Nicholas Mak, head of research and consultancy at SLP International.

"Due to the size of the plot, and with the ports eventually moving to this area, there are more development options," said Mr Mak.

"There is also demand for strata-landed terrace factories. Because the land is big and the plot ratio is low, there is an option for the developer to build both strata-landed factories and multi-storey factories. That could be another reason for the popularity of the site," he said.

Other bidders for the plot include Soilbuild Group Holdings ($23.9 million or $40.02 psf ppr) and Gradeone Capital, which put in the lowest bid of $12.8 million ($21.44 psf ppr).
Designated for Business 2 development, the site drew a total of eight bids.

The second site, a 0.3-ha parcel in Tuas South Street 8 (Plot 10), drew a total of 13 bids. The top bid of $2.4 million ($73.45 psf ppr) was put up by Boilermaster Holdings.

The site, which has GPR of 1.0, is designated for B2 development and has a five-year restriction post TOP within which the site cannot be strata-subdivided. The site has a tenure of 22 years and 5 months.

That the plot managed to attract 13 bids with a mere difference of 0.8 per cent between the top two bids despite the five-year restriction shows that there is still healthy demand from industrialists, said CBRE's Mr Sim.

R'ST's Mr Ong said land prices for small sites on short tenures targeting end-users are expected to hold or increase, given strong competition among end-users and the low interest rate environment.

"(Such) sites will continue to be favoured, as many end-users feel that owning a production space is key to having long-term certainty and competing with their peers ... This mindset for short tenure industrial sites in Tuas will persist going forward."

The last site, a 0.35-ha plot at Ubi Avenue 4 with a 30-year lease and GPR of 2.5 drew 10 bids. The top bid of $16.2 million ($172.00 psf ppr) was put up by Boustead Singapore's BP-Ubi Industrial.

The keen interest seen was expected given the limited supply of B1 sites on the GLS programme, said CBRE's Mr Sim.

"(This is) coupled with the fact that the site is located in the established Ubi area where demand for industrial space has traditionally been healthy," he said.

Other bidders for the site, which cannot be strata-subdivided for 10 years from the date of issue of TOP, include Tiong Seng Contractors ($9.0 million or $95.00 psf ppr) and OKH Holdings ($8.2 million or $86.98 psf ppr).

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

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

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