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Singapore’s industrial property market continued to see healthy leasing activity in Q1 2015 thanks to strong demand from growth industries like data centres, while businesses involved in the manufacturing of high-technology products are still expanding and looking for more space, according to a report from Colliers International.
“Against this backdrop, landlords of multi-tenanted conventional industrial buildings generally held on to their rental expectations in 1Q 2015 after lowering their expected rents in 4Q 2014. However, landlords remained mindful of the stiff competition for qualifying tenants, as well as tenants’ continued cost sensitivity,” it said.
Consequently, the average monthly gross rents of ground-level prime conventional factory space remain unchanged on a quarterly basis at S$2.53 per sq ft, but its upper-floor counterpart suffered a marginal fall of 0.5 percent to S$2.06 per sq ft.
The average monthly gross rents of prime ground-level conventional warehouse space was also flat at S$2.49 per sq ft in the first quarter, while that for upper-level premises eased by 1 percent to S$1.94 per sq ft.
In contrast, the average rents of business park premises strengthened further during the period under review, rising by 1.5 percent to S$4.17 per sq ft versus a milder increase of 0.7 percent in the previous quarter.
“This came mainly on the back of limited supply and higher rental expectations for newer developments that enjoyed healthy take-up, particularly in one-north,” noted the consultancy.
Similarly, the average monthly gross rents of ground-floor independent high-specification industrial premises located outside the science and business parks increased by 3.1 percent to S$3.30 per sq ft, while that of upper-floor spaces rose by 4.7 percent to S$3.11 per square foot.
Despite the stable rental growth, sales of strata-titled industrial properties shrank further in Q1 2015. Based on preliminary data from URA’s Real Estate Information System (REALIS), there were only 140 transactions in this segment compared to 263 a quarter ago.
Although the final transaction volume is expected to be lower than the level seen in Q4 2014, average capital values of prime freehold conventional industrial space stayed relatively stable during the quarter.
Based on a basket of properties tracked by Colliers International, average capital value of prime ground-level conventional factory spaces were static at S$863 per sq ft in Q1 2015, while that of upper-level premises eased by 0.1 percent to S$735 per sq ft.
“For prime conventional freehold warehouse space, the average capital values for both ground- and upper-floor premises remained flat for the fifth consecutive quarter at S$661 per square foot and S$587 per square foot respectively.”
But the average transacted prices for both 30-year and 60-year leasehold industrial properties fell during the first quarter at 1.8 percent and 3.3 percent respectively.
Looking ahead, rents of prime conventional industrial properties are projected to slide further by up to 4 percent for the whole of 2015 as the competition for qualifying tenants heats up amid mounting supply pressures.
“However, rents for business parks and independent high-specs buildings are expected to continue to buck the downward trend and strengthen by a total of up to 3 percent and 6.5 percent in 2015 respectively, on the back of a tightening in supply,” Colliers said.
As for the sales of strata-titled industrial properties, transaction activity is expected to remain weak as buyers and sellers continue to engage in a waiting game to see which side will accept the other party’s price.
“However, faced with a triple whammy of weak buying demand, rising interest rates and softening rents, sellers with weaker holding power are more likely to relent on their expected prices in the coming quarters to move sales. Hence, overall industrial prices could ease by up to 3 percent in 2015,” it 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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