Growth of industrial capital values continue to decelerate as rents hold firm

Despite increasing activity in the manufacturing sector, price growth of first and upper-storey conventional industrial space continued to decelerate q-o-q in Q2 2013 while rents held steady, according to DTZ, a UGL company.

The capital value growth of industrial properties is losing momentum with resale prices of first and upper-storey space rising marginally by 0.3% and 0.6% q-o-q respectively in Q2. This brought price growth of first and upper-storey space to 0.8% and 2.6% for H1 2013 respectively, slower than the 7.8% and 6.5% growth in H2 2012.

Transaction activity for strata-titled industrial units also continued to fall in Q2. Based on caveats from URA REALIS, only 266 resale strata factory units were transacted in Q2, 17% less than that recorded for Q1. As a whole, the total number of strata-titled factory transactions for H1 2013 was 53% lower than H2 2012 and also 46% lower than H1 2012.

Lee Lay Keng, DTZ’s Head of Singapore Research said, “Besides the dampening effect of the seller’s stamp duty (SSD) implemented in January, the fall in transaction volume was also due to a mismatch in expectations between buyers and sellers. Sellers are holding on to their asking prices while buyers are becoming increasingly cautious due to the SSD and the possibility of an increase in interest rates.”

Meanwhile, based on a basket of existing buildings tracked by DTZ Research, rents for industrial space held firm q-o-q. Average gross rents for first and upper-storey conventional industrial space were unchanged at $2.15 per sq ft per month and $1.75 per sq ft per month respectively. Similarly, hi-tech rents held steady q-o-q at $3.10 per sq ft per month after a 3.3% increase in Q1.

According to Angela Tan, DTZ’s Regional Head, Occupier Services, “In the business park segment, rents held steady at $4.70 per sq ft per month as this quarter saw continued interest from companies in the pharmaceutical, infocomm, media and technology sectors which favour the newer, better quality and more self-sufficient environment offered by business parks. Although the business park segment will see a surge in supply of about 2.5 million sq ft over the next two years, rents are still projected to increase alongside the expected economic recovery in H2 2013. Moreover, about 60% of this upcoming supply is owner-occupied or has been pre-leased, thus the impact of this new supply on business park rents will be somewhat limited.”

Between Q2 2013 and 2014, approximately 32 million sq ft NLA of industrial space will be completed. Of this amount, 32% will encompass warehouse space while another 24% will be single-user factory developments, both predominantly located in the western region of Singapore. On the other hand, the majority of multiple-user factory developments are more evenly spread across the island and constitute about 27% of the oncoming supply from Q2 2013 till 2014. Some of the major multiple-user factory developments anticipated to be completed in the next two years include North Spring Bizhub (2013), Premier@ Kaki Bukit (2014) and Synergy @ KB (2014). –

Source: DTZ Singapore

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