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The industrial property market had a subdued and cautious mood in Q3 2015 as it witnessed stagnant rents, fewer leasing transactions and low strata-titled sales, said Colliers International.
Rental records in URA’s REALIS as of 15 October showed that the number of leasing deals including those for factory, warehouse and business park premises dropped from 2,392 in Q2 2015 to 2,081 in Q3 2015.
“Industrialists were seen exercising greater caution and taking a longer time to commit to their real estate requirements during the quarter, amid growing macroeconomic uncertainties,” said Tan Boon Leong, Executive Director of Industrial Services at Colliers International.
“Cost containment also continued to feature prominently on tenants’ corporate real estate agenda when they assessed their space needs. This affected the volume of leasing deals and weighed down on rents. Landlords were also seen adopting a more flexible stance during negotiations.”
As such, rents either stagnated or eased across the industrial sector.
In the prime conventional factory space segment, the average monthly gross rents eased by another 0.4 percent quarter-on-quarter and one percent quarter-on-quarter for ground- and upper-level space, respectively, to S$2.51 per sq ft and S$2.02 per sq ft in Q3 2015.
Rents for ground-level prime conventional warehouse space held firm at S$2.49 per sq ft, while that of upper-level space fell by another one percent quarter-on-quarter to S$1.90 per sq ft.
Independent high-specification industrial developments outside science and business parks saw average monthly gross rents remain stable at S$3.31 per sq ft for ground-level space and S$3.13 per sq ft for upper-level premises.
Meanwhile, sales of strata-title industrial properties remained low in Q3 2015.
The number of caveats lodged fell to 176 in Q3 2015 from 289 in Q2 2015, showed preliminary caveat records from the URA’s REALIS as of 15 October 2015. The figure is the lowest quarterly sales recorded since Q4 2008 and Q1 2009, when only 177 and 132 caveats were recorded, respectively.
Looking ahead, Colliers expects the market condition within the industrial property market to remain challenging in Q4 2015.
“Taking into account the global downside risks and lacklustre manufacturing sector performance, most industrialists are expected to stay cost conscious and cautious with their business and real estate needs,” said Tan.
“With ample available choices in the market, resulting in heightened competition for qualifying tenants, rents could continue to ease in the months ahead.”
Notably, rents for prime multi-user conventional industrial space are expected to fall by up to one percent in Q4 2015, while business park rents may witness a slight decline, similar to that recorded in Q3 2015.
Rents for independent high-specs industrial premises, on the other hand, will likely remain stable for the rest of the year due to limited supply.
Colliers also expect the activities in the strata-titled sales segment to stay depressed, with buyers being more selective with their purchases.
“Despite this, the average prices of prime freehold conventional industrial properties are projected to hold steady, as most owners are not likely to relent on their asking prices and may prefer to lease out their properties instead,” it added.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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