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Singapore’s industrial sector saw transaction activity remain muted in Q3 2015, with the number of caveats lodged for strata factories and warehouses reaching a new low of 326, revealed a Savills report.
The figure represents a 28.4 percent quarter-on-quarter decline and 41.5 percent year-on-year fall. Notably, the decrease was concentrated in the sale of freehold units, which shrank by more than half during the period under review.
The report said, “nonetheless, prices of upper-story factory and warehouse units in Savills basket show that sellers are not compelled to lower their price expectations despite waning buyer interest,” said the report.
Leading the way in price appreciation are 30-year leasehold properties, which registered a 3.9 percent quarter-on-quarter increase to S$385 per sq ft. 60-year leasehold properties and freehold properties, on the other hand, saw marginal declines of 0.4 percent to S$483 per sq ft and 0.7 percent to S$655 per sq ft respectively.
Meanwhile, rental transactions of factories and warehouses fell 12.3 percent from 2,317 deals in Q2 2015 to 2,031 in Q3 2015.
Despite this, cumulative transactions for the first nine months of the year still managed to surpass the levels registered in the same period last year.
“This can be attributed to the progressive leasing of interim spaces which have accrued from the conversion of single-user buildings into multitenant assets. The push for conversion comes as master-leasees are consolidating operations, with landlords reacting to the industrialists’ need for smaller floor areas,” said Savills.
“Nevertheless, with occupancy rates remaining steady and positive rental reversions still coming through, there is still a positive side to the market. In a challenging business environment, either because there is a lack of similar space to move into or to save on relocation costs, tenants are opting to stay-put.”
Savills said landords are also see offering competitive rents to retain tenants.
“With both tenants trying to save on relocation costs and landlords being more understanding, rents across the factory types have remained flat in Q3.”
Notably, factory/warehouse and high-tech rents are gridlocked at S$1.85 per sq ft per month and S$3.00 per sq ft per month respectively.
Looking ahead, Savills expect the industrial market to enter a period of oversupply in the next five years, with an influx of 40.4 million sq ft of factory and warehouse space.
“This will inevitably have a negative impact on prices in the industrial market,” it said.
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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