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Leasing activity in Singapore’s industrial property market rose in Q2 2015, but sales of strata-titled premises remained sluggish, a report from Colliers International revealed.
Based on the caveats lodged in URA’s Real Estate Information System (REALIS) as of 1 July 2015, a total of 836 leasing deals were recorded in May. This up from 756 in recorded in April and 651 in March.
Colliers attributed the increase to the sustained demand from flourishing industries, like data centres and companies involved in the production of high-tech products. Another contributing factor is that some businesses impacted by the government’s industrial estate redevelopment plans were looking for alternative premises.
Despite better leasing activity, the quarter saw marginal rental growth of between -1 percent and 1 percent across the different types of industrial properties, given the fierce competition for qualified tenants who are still cost-sensitive.
In particular, monthly rents of ground-floor prime conventional factory space dipped by 0.4 percent to S$2.52 per sq ft in Q2 2015 on a quarterly basis. Upper premises also recorded a decline with 1 percent drop to S$2.04 per sq ft.
For prime conventional warehouses, average gross rents of ground-level space were unchanged at S$2.49 per sq ft while upper-level premises slipped by 1 percent to S$1.92 per sq ft.
At business parks, monthly rents were flat at S$4.17 per sq ft amid the varying rental expectations of landlords of newer and older projects.
In contrast, rents of high-spec industrial developments edged up by 0.3 percent to S$3.31 per sq ft for ground-floor space, while upper-level premises posted a 0.6 percent gain to reach S$3.13 per sq ft.
As for sales of strata-titled industrial properties, it remained anaemic in Q2 2015 as the soft buying sentiment extended into another quarter. In fact, URA data showed that the number of caveats filed eased to 206 from 220 in Q1 2015.
According to the report, the soft market activity is due to the government’s Total Debt Servicing Ratio (TDSR) framework, as well as worries over the expected interest rate hike and buyers’ anticipation of a looming price correction. Another contributing factor is continuing price disagreements between owners and purchasers, the report said.
Colliers’ Executive Director of Industrial Services Tan Boon Leong said: “The poor buying sentiment, coupled with the heightened competition from sellers looking to offload their industrial units in the secondary market, also continued to pose challenges for developers, who were looking for an opportune time to release units in new strata-titled industrial developments for sale in Q2 2015.”
Separately, the average capital value of ground-floor units at prime freehold conventional factories remained unchanged at S$863 per sq ft for the 4th straight quarter. The average capital value for upper-level premises also remained flat at S$735 per sq ft after receding slightly in the Q1 2015.
Similarly, prices of ground- and upper-level prime freehold conventional warehouse space held steady for the 6th consecutive quarter at S$661 per sq ft and S$587 per sq ft respectively.
“Looking into 2H 2015, the industrial property market is expected to remain in a quiet state similar to that in 1H 2015,” said Chia Siew Chuin, Director of Research & Advisory at Colliers.
Specifically, rents of prime multi-user conventional industrial properties are expected to decline further by as much as 2 percent in the next six months. On the other hand, rents of business parks and independent high-spec industrial premises could rise by up to 1 percent over the same period.
Meanwhile, the sale of strata-titled industrial units is forecasted to remain slow in 2H 2015 as long as the transaction parties cannot reach a consensus on the selling price.
But the report also said sellers with weak holding power could lower their asking prices, in light of the weak buying interest, falling rents and the upcoming interest rate hike. This could exert downward pressure on the capital values of industrial properties for the remainder of the year, 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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