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Singapore saw industrial space prices and rents continue to fall in tandem with occupancy rates in the second quarter of 2016, JTC’s latest statistics released on Thursday (28 Jul) revealed.
Prices for overall industrial space fell by 2.3 percent while industrial rents dipped 1.7 percent. At the same time, the occupancy rate for the overall industrial property sector also fell 0.7 percentage points on a quarter-on-quarter basis to 89.4 percent in Q2 2016.
On a yearly basis, the occupancy rate for overall industrial space fell 1.6 percentage points while prices and rents dropped by 6.5 percent and 6.1 percent, respectively.
It fifth consecutive quarter where industrial price and rental indices fell on both a year-on-year and a quarter-on-quarter basis.
JTC attributed the declines in industrial prices and rents to the increase in supply of industrial land and space in recent years.
Meanwhile, property consultancy JLL noted that the business park segment had bucked the declining trend in Q2 2016, with rents increasing by 0.5 percent quarter-on-quarter.
It was the only industrial segment to witness a rise in rents in the quarter even as it registered the highest vacancy rate of 19.0 percent in Q2 2016, said JLL.
Notably, vacancy rate for the business park segment rose 0.7 percent to 10.6 percent in Q2 2016.
JLL Singapore Head of Research Tay Huey Ying attributed the increase to higher rents commanded by newer projects.
“Driven largely by flight to quality by occupiers from the Science and IT-related clusters, leasing activity was observed to have gained traction for a handful of new buildings in 2Q16. The higher leasing volume was seen for these developments which command higher rentals than older premises could have contributed to the lift in the overall rental index for business park premises,” she said.
Beyond the flight-to-quality activities witnessed in newer developments, she cautioned that activity within the business park segment was generally subdued with no new tangible leasing demand observed.
Tay added that rents for older business parks remained under pressure.
Excluding new completions, the average monthly gross rents of business park space remained soft, as it corrected by 0.8 percent in Q2 2016, just marginally slower than Q1 2016’s 1.1 percent drop, showed JLL’s research.
Looking ahead, Tay expects drivers of demand to continue to pivot on value-added advanced manufacturing sectors while back-room demand by the financial sector is likely to remain sluggish in the near-term.
“Nonetheless, physical occupancy of Business Park spaces is expected to gain momentum towards the latter half of 2016 and in 2017 as a good number of occupiers are expected to complete fitting-out works and commence operations,” she said.
“Coupled with the tapering off of new supply from Q3 2016 onwards, vacancy rates look peakish and could head down by end 2016/early 2017. This could ease some downward pressure on rents in time to come.”
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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