Industrial properties star performer in Q1

Industrial properties star performer in Q1

Continued diversion of investor interest toward the industrial property sector trumped global economic uncertainties, resulting in Singapore's industrial property market emerging the best performing real estate sector in the opening quarter of 2012.
Average capital values for prime freehold factories on the ground floor confounded market expectations by climbing 4.8 per cent on a quarter-on-quarter basis, to $633 psf as at end-March 2012; upper floor space rose 5.3 per cent q-o-q to $560 psf during the same period.

The recent tightening of development guidelines for industrial sites, including that certain GLS sites located near MRT stations are not allowed to be strata sub-divided within the first 10 years, and that subsequent subdivisions must have a minimum size of 1,615 sq ft GFA, too provided buyers added impetus to bring forward their purchasing plans of new strata industrial units near MRT stations, or new small-format industrial units.

On the flipside, the leasing market was less upbeat, as growth in rents continued to show signs of tapering off.

The average monthly gross rents of prime factories and warehouses rose 0.5 per cent to 0.8 per cent q-o-q in the first three months of 2012, compared with the preceding quarter's rise of up to 2.0 per cent q-o-q.

As of end-March 2012, prime factory space commanded average monthly gross rents of $2.39 psf for ground floor space and $2.08 psf for upper floor space, while the corresponding rates for warehouses were $2.47 psf and $2.04 psf, respectively.

Rents for business parks and high-specs space contracted during the quarter, due to slowing demand from industrialists, and easing spill-over demand from the office sector due to falling rentals and an ample pipeline of suburban office space.

Business parks rents fell 1.5 per cent q-o-q to $3.90 psf in the first quarter of 2012. Based on a new basket of high-specs spaces tracked, high-specs rents stood at $3.17 psf as of March 2012. However, in the prime central locality, high-specs rents could command between $3.80 to $4.00 psf in the same period.

However, demand for industrial space could be shored up by the continuing presence or incoming of firms looking to leverage Singapore's global-Asia positioning, and Singapore's business- friendly environment.

This should help to limit the dip in overall industrial rents by three per cent for the whole of 2012.

Capital values are expected to hold relatively stable in 2012, as the low interest rate environment and strong liquidity in the market are expected to sustain cautious optimism and support buying momentum.

Source: Business Times – 13 April 2012