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Rents of industrial properties generally stayed subdued in Q3 2014 as tenants remain cost-sensitive, while landlords face stiffer competition for qualified lessees amidst a higher supply of completed properties, said Colliers International.
In the past six months, about 11.7 million sq ft of industrial space entered the market compared to 9.3 million sq ft and 6.3 million sq ft in H2 and H1 of last year.
As a result, the average monthly gross rents of business park space remained the same at S$4.08 per sq ft during the third quarter.
Similarly, rents of independent industrial premises with high-specification were relatively flat. On a quarterly basis, rents of ground-floor space dipped by 0.3 percent to S$3.19 per sq ft, while that of upper-floor space were unchanged at S$2.95 per sq ft.
In contrast, average monthly gross rents of prime conventional warehouses marked its fourth straight quarterly decline in Q3 2014, with rents of ground-floor space dipped by 0.8 percent to S$2.52 per sq ft, while that of upper-floor premises fell by two percent to S$2 per sq ft.
As for conventional factory space, rents of prime ground-floor space increased by 0.8 percent to S$2.57 per sq ft, while that of upper-level premises decreased by 0.9 percent to S$2.12 psf.
“Similar to Q3 2014, rents for business parks and independent high-specs buildings are expected to hold steady in Q4 2014, mainly due to a tightening in supply. The reverse is expected to be true for the prime conventional industrial segment, where rents could ease further in Q4 2014, albeit marginally at 0.5 percent, on the back of supply pressures,” added Chia Siew Chuin, Director of Research & Advisory at Colliers International.
Meanwhile, the rental gap between business parks in the City Fringe and those in the Rest of Island has widened further during the third quarter as more industrialists were drawn by the latter’s better connectivity and newer buildings with higher specifications.
Based on CBRE’s data, average monthly rents for business parks in the City Fringe area stayed the same at S$5.50 per sq ft, while those in the Rest of Island declined by 2.6 percent to S$3.70 per sq ft.
“Occupiers are more keen on higher specifications, quality developments which the City Fringe has been able to provide. The location and connectivity are also important considerations which prompt occupiers to pay the premiums in rent. This flight to quality has hollowed out the older business parks in the Rest of Island, leading to the rent divergence,” said CBRE Executive Director for Office Services Michael Tay.
“We expect the rent differential between City Fringe and Rest of Island business parks to stabilise as more of the older buildings in the Rest of Island stay competitive through asset enhancements. Rents in new developments will edge up but this increase is likely to be restrained by older assets that offer more competitive rents,” he added.
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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