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Singapore saw average monthly gross rents of hi-tech industrial and business park spaces drop by 3.3 percent and 2.1 percent to $2.95 per sq ft and $4.60 per sq ft respectively in Q3 2016. the fourth consecutive quarterly decline, according to Edmund Tie & Company Research.
According to the report, business parks occupancy rates have been on the downtrend for the last four quarters, reaching 78.5 percent in Q2 2016. Rents in older business parks faced greater pressure as business park completions are expected to hit 1.6 million sq ft for the whole of 2016.
“With global demand for exports remaining weak, the growth in demand for conventional industrial space has contracted further,” it said.
As such, rents for conventional factory space registered a bigger fall. Monthly gross rents of upper-storey factory space slid 3.3 percent quarter-on-quarter to S$1.45 per sq ft, while that of first-storey factory space dropped by 3.9 percent quarter-on-quarter to S$1.85 per sq ft.
With this, the consultancy expects rents for conventional factory space to fall by 14 percent to 16 percent for the entire 2016.
But despite the weak industrial leasing market, foreign companies still choose Singapore as a strategic destination to create regional presence.
Global biopharmaceutical firm AbbVie, for instance, opened its small molecule active pharmaceutical ingredient facility at Tuas Biomedical Park in September 2016, while Japan’s Agency for Medical Research & Development set up its first overseas office in Singapore at Ascent in Science Park in Q1 2016.
Dr Lee Nai Jia, Regional Head (SEA) of Research at Edmund Tie & Company, believes that while the manufacturing sector faces a challenging economic environment, the downturn is only transitory.
“With the Government’s push for the industry transformation map for precision engineering and plans to grow the remanufacturing sector in the Tengah area, the outlook for the industrial sector in the next ten years will be optimistic.”
“As Singapore establishes itself as a circular economy and embraces Industry 4.0, older firms that innovate will find a new lease of life. There will be more companies like Bang & Olufsen, which embraced new technology by reinventing themselves through collaboration with the engineering growth clusters,” added Dr Lee.
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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