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Despite health leasing activity, owners of multi-tenanted conventional industrial buildings generally lowered their rental expectations in Q4 2014, given the fierce competition for qualified tenants and the ramp up of supply among 30-year leasehold industrial properties by the authorities.
As a result, average monthly gross rents of prime conventional industrial space monitored by Colliers International declined in the fourth quarter. Specifically, rents of ground-floor factory space dipped by 1.6 percent to $2.53 psf, while rent of upper-floor premises fell 2.4 percent to $2.07 psf on a quarterly basis.
This means the average monthly gross rent of prime conventional ground-floor space grew 1.2 percent for the whole of 2014 compared to the 0.8 percent gain in the previous year. In contrast, rents of upper-floor premises shrank 4.6 percent last year after it remained unchanged in 2013.
As for prime conventional warehouse space, average monthly gross rents of ground-floor and upper-floor premises fell for the fourth consecutive quarter by 1.2 percent and 2.0 percent respectively to $2.49 psf and $1.96 psf in Q4 2014. Consequently, rents of these types of spaces correspondingly receded by 4.2 percent and 7.5 percent for the entire year.
Conversely, monthly rents of business park space edged up by 0.7 percent to $4.11 psf during the fourth quarter, bringing the full-year growth to 1.5 percent versus 2013’s 3.6 percent.
Likewise, the average monthly gross rents of ground-floor independent high-specs industrial premises inched up 0.3 percent to $3.20 psf, while rents of upper-floor space climbed 0.7 percent $2.97 psf
However, sales of strata-titled industrial properties remained slow in Q4 2014 in light of the traditional holiday lull, effects of the Total Debt Servicing Ratio (TDSR) framework, coupled with the continuing price standoff between buyers and sellers.
Based on URA’s Real Estate Information System as of 6 January 2015, the number of caveats filed for industrial property transactions dropped to 228 during the fourth quarter from 296 in Q3 2014.
Although the last quarter’s final record is projected to be higher, considering that all 87 industrial units at Mandai FoodLink were snapped up, the number of caveats for the quarter is unlikely to exceed 500, while the total annual sales for 2014 is unlikely to surpass 1,500.
“This means that the total number of caveats lodged for strata-titled industrial properties had fallen for the second consecutive year, from the peak of 4,426 caveats in 2012 and 2,438 caveats in 2013 to a five-year low in 2014,” Colliers concluded.
Looking ahead into the next 11 months, rents of multi-tenanted conventional industrial space may decline further due to mounting supply pressures, while tenants who immediately require large industrial space of at least 100,000 sq ft could struggle in finding suitable premises.
Muneerah Bee, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email muneerah@propertyguru.com.sg
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