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Prices and rents of industrial spaces in Singapore fell in the first quarter of 2016, as vacancy rates continue to rise, the latest statistics from JTC revealed.
Prices of the overall industrial property market declined for the fourth straight quarter in the January to March period, declining 2.5 percent from the previous quarter.
Anthea To, senior associate director at Colliers International, said: “[the decline] implies that more sellers—especially those with weaker holding power or faced difficulties servicing their bank loans—have relented on their price expectations to move sales, amid the persistent economic uncertainties and weak buying sentiment.”
To noted, however, that the overall industrial Property Price Index (PPI) fell only by 4.8 percent over the last four quarters. “[the overall decline] showed that most sellers were not lowering their prices drastically and still have holding power. As of Q1 2016, the All Industrial PPI was still 106.5 percent above the Q3 2009 trough.”
Meanwhile, rents have also weakened further—falling 2.7 percent from Q4 2015. It is also its fourth straight quarter of decline, but is the steepest quarterly fall since it started to weaken in 2014. Colliers attributed the decline to the weakness on the manufacturing and export fronts, saying it has “dampened business sentiment, and contributed to the slowdown in leasing activities and growing vacancies during the quarter.”
According to property consultancy JLL, ” Rental declines were broad-based with multiple-user factories taking the lead, posting a 3.7 per cent quarter-on-quarter fall. The industrial property market is certainly feeling the pressure of the protracted manufacturing downturn that has led to sluggish demand particularly for multi-user factory space.”
Citing JTC’s statistics, JLL added that multi-user space completed in 2015 only registered occupancy rate of 32.1 percent as of the end of March 2016, while those completed in the first quarter of the year is only 0.4 percent occupied.
Occupancy rates fell in tandem during the first quarter, declining 0.6 percent from Q4 2015. This resulted in a vacancy rate of all industrial space hitting 9.9 percent.
JTC said about 2.4 million sq m of industrial space will come on-stream over the next three quarters, and another 1.8 million sq m next year. In comparison, the average annual supply and demand of industrial spaces were around 1.8 million sq m and 1.2 million sq m over the past three years.
Given this, the industrial landlord said the supply glut is likely to “exert further downward pressure” on occupancy rates.
Colliers echoed this sentiment saying: “With no firm signs of a turnaround in the performance of the manufacturing sector, industrialists and landlords should brace themselves for more challenges ahead.”
“Against this backdrop, cost containment is expected to be a key guiding principle behind most occupiers’ real estate decisions in 2016. Coupled with the abundance of space options in the market, industrial landlords are expected to hold realistic rental expectations and place emphasis on tenant retention in the coming quarters.”
Looking ahead, Colliers said the overall industrial price and rental indices could fall by 7 percent to 10 percent for the whole of 2016.
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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