Stable year for industrial rents: Colliers

INDUSTRIAL rents are expected to stabilise for the rest of the year amid a fragile economic outlook and ample supply for tenants, Colliers International said.

The property consultancy yesterday reported that rents were flat across all segments in the second quarter over the previous quarter. Colliers divides industrial property into prime conventional factory and warehouse space, high-specifications space and business park space.

Average gross rents for prime conventional factory space in Q2 was $2.49 per square foot (psf) for ground floors and $2.18 psf for upper levels. For warehouse premises, rents were at $2.62 psf for ground floor space and $2.15 psf for upper floor space.

Rents for high-specifications space was $3.30 psf for ground floors and $2.98 psf for upper floors.

Business park space also held steady at $4.04 psf.

“The stability in the rental movement across all segments in Q2 2013 was a reflection of landlords generally holding onto their rental expectations and a relatively tepid leasing demand,” said Tan Boon Leong, executive director of industrial services at Colliers International.

He specifically thinks that rents for prime conventional factory and warehouse space may have peaked.

The overall take-up rate was slow in the second quarter as tenants took more time to evaluate their real estate needs amid lingering economic uncertainties, Mr Tan said.

“Additionally, in some cases, the leasing process was also prolonged by more detailed checks conducted to qualify users and to ensure compliance with the government’s guidelines.”

Industrial properties generally can only devote up to 40 per cent of floor area for non-industrial use such as offices and canteens. At least two developers were rapped by the authorities for illicit usage earlier in the year.

With cost-conscious tenants, as well as sufficient supply of industrial real estate, any increase in rents will be limited for the rest of the year, said Chia Siew Chuin, director of research and advisory at Colliers International.

Ms Chia expects rents to remain unchanged for prime conventional industrial space, with some upside for high-specifications and business park space.

In the sales market, average prices rose in Q2 over the previous quarter.

Mr Tan said healthy demand from genuine end users and long-term investors for freehold industrial properties with good locations and specifications held up prices, even as speculative activity waned with the introduction of a Sellers’ Stamp Duty in January on all industrial properties sold within three years of purchase.

Average capital values for ground floor space at prime freehold conventional factory space gained 0.7 per cent to $718 psf; those for upper floor space rose 1.5 per cent to $658 psf.

For prime freehold conventional warehouse space, prices grew by 1.1 per cent to $656 psf for ground-floor premises and 0.9 per cent to $581 psf for upper-floor space.

Ms Chia expects prices to gain 3 per cent for the full year for these two property types, significantly lower than the 10 to 22 per cent growth last year.

 

Source: STPROPERTY

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