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Demand for industrial space in Singapore remained low in Q3 on the back of a patchy performance in the manufacturing industry, property consultancy DTZ revealed Thursday (9 October).
Citing caveats from the Urban Redevelopment Authority’s (URA) REALIS, the consultancy said sale transactions of strata-titled industrial properties in Q3 have fallen by around 36 percent quarter-on-quarter (q-o-q) to 203 – an even more significant drop compared to the 672 strata-titled units sold over the same period last year.
The total amount of transactions in the Republic in the year to-date is 842, significantly lower than the 1,986 transactions registered in the same period last year. The firm also attributed the decline in transactions to the combination of fewer new launches, seller’s stamp duty measures as well as the implementation of the Total Debt Servicing Ratio (TDSR) framework last June.
Meanwhile, average monthly gross rents for business parks continued to increase by 2.0% q-o-q in Q3 to $5.00 per sq ft, despite a slowdown seen in average capital and rental values for conventional industrial spaces.
A total of 40.7 million sq ft of industrial space is expected to be completed by 2016, where multiple-user factories make up about 27%, or about 11 million sq ft of the supply. “This translates to an annual average supply of 4.4 million sq ft which is significantly larger than the past three-year average annual demand of multiple-user factories at 3.8 million sq ft. Downward pressure on rents for conventional industrial space is therefore expected to continue,” the report said.
“Meanwhile, 4.1 million sq ft of business park space is expected to be completed between H2 2014 and 2016, with the bulk (41%), or 1.7 million sq ft, completing in 2016. This will largely stem from the expected completion of Mapletree Business City Phase II, which will add 1.1 million sq ft to the business park stock,” it added.
Going forward, DTZ said: “While demand for business park space is expected to remain healthy, especially for newer and more centrally located ones, the large supply in 2016 is likely to restrain rental growth. The older business parks may find it increasingly difficult to retain and attract tenants alongside these newer business parks which have better quality specifications and modern facilities that appeal better to prospective tenants. This could further exacerbate the two-way movement in rents between the newer and older business park buildings.”
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this and other stories, email nikki@propertyguru.com.sg
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