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Average rents of industrial properties in Singapore dipped by 1.3 percent in Q4 2014 compared to the previous quarter because of a significant mismatch between supply and demand, according to DTZ.
In the first ninth months, about 14.5 million sq ft of factory space were completed, but only 4.8 million sq ft were taken up – down from the 5.3 million sq ft seen during the same period in 2013.
Despite the softer demand, monthly rents of traditional industrial space rose by 1.6 percent on an annual basis to reach S$2 per sq ft in 2014.
But it was the business park segment which enjoyed the highest annual rental increase of 6.8 percent to hit S$5 per sq ft in Q4 2014, while its occupancy rate rose by 7.1 percent year-on-year.
“Demand for business parks and hi-tech properties were more resilient this year,” said Cheng Siow Ying, DTZ’s Executive Director of Business Space.
“This is due to the increase in office rents, which motivated some qualifying occupiers to seek out more affordable options in these office-industrial hybrid spaces. Tenants prioritising on cost savings and good locations will be willing to pay higher rents for newer and better quality buildings such as those at one-north, Aperia and Mapletree Business City,” Cheng explained.
In contrast, transactions of strata-titled industrial properties fell by nearly 20 percent in Q4 2014 on a quarterly basis. In total, only 936 strata-titled industrial properties were transacted for the entire year versus the 2,451 deals recorded in 2013.
The sharp decline in sales is attributed to financing constraints faced by potential buyers amidst the Total Debt Servicing Ratio (TDSR) framework. Other negative factors include the anticipated rise in interest rates as well as the heightened political and economic uncertainty across the globe.
Looking ahead, demand for industrial space is projected to pick up 2H 2015 due to the upcoming ASEAN Economic Community (AEC), and a total of about 8.1 million sq ft of multiple-user factories are slated for completion between this year and 2016.
Sales of industrial space may also pick up this year, but it depends on whether the tax exemption for REIT’s foreign earnings will be extended past its deadline in March 2015. Without this rule, REIT managers could shift their attention to Singapore’s industrial market, DTZ added.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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