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Industrial prices, rents to fall further in 2017

Feb 21, 2017
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Industrial property prices across Singapore dropped by three percent on a quarterly basis in Q4 2016, a bigger fall from the previous quarter, and marks seven consecutive months of negative price growth, according to an OrangeTee report.

In particular, single-user and multiple-user factories recorded quarterly declines of 3.9 percent and 2.1 percent respectively, and have fallen by 8.4 percent and 15.1 percent since the start of the downtrend in Q1 2015.

Last quarter, sales of industrial properties also decreased by 11 percent quarter-on-quarter and 15 percent year-on-year, with transactions consisting mostly of resales as developers continue to hold back new launches.

For the whole of 2016, the volume of deals slumped to just 930 units, the lowest level in 11 years and about 80 percent below the peak in 2012, said the property consultancy.

In addition, the appetite for industrial space has slowed, with net demand hitting 1.14 million sq m in 2016, translating to an annual drop of 15 percent and a steeper fall of 17.4 percent from the most recent peak in 2014.

Meanwhile, rents of industrial space in the city-state remain under pressure, as incoming supply continues to outstrip demand, noted OrangeTee.

In Q4 2016, island-wide rent dipped by 0.5 percent, with that for factory and warehouse space sliding by 0.2 percent and 0.9 percent respectively, while business parks saw a 1.2 percent uptick. At the same time, the vacancy level of factories and warehouses fell between 0.2 to 0.6 percentage points.

Looking ahead, rents and prices of industrial properties are expected to fall further, given the rising vacancy rate and sizeable pipeline. In 2017, about 2.4 million sq m is expected to come on-stream, representing a surge of 33.3 percent over the three-year average annual supply.

“With demand expected to remain lacklustre and a bumper crop of incoming supply in 2017, the routing of prices and rents is set to continue,” it added.

 

Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg

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