Category Archives: Office / Retail / Industrial

Industrial property likely to stay mixed in Q4

SINGAPORE’S industrial property market is expected to remain mixed in the fourth-quarter of 2014, given the presence of persistent downside risks, which include uncertainties surrounding the global economic recovery and the traditional year-end holiday lull.

Colliers International on Thursday said in its report that replacement anchor sub-tenants will be harder to find when secondary industrial space becomes available from expiring sale and leaseback transactions.

Chia Siew Chuin, director of research and advisory at Colliers, said current anchor sub-tenants leasing space from third-party facility providers will enjoy stronger bargaining power in lease-renewal negotiations.

“This could hurt rents and yields achievable by the third-party facility providers in the medium term,” said Ms Chia, who added that rents for business parks and independent high-specs buildings are expected to hold steady in Q4, similar to Q3, mainly because of a tightening in supply.

But the prime conventional industrial segment, would probably have rents easing marginally further in Q4 on supply pressures, said Ms Chia.

Sale of strata-titled industrial properties is expected to remain slow, with the likelihood that the number of caveats lodged for the entire year will be below the 2,000-level.

The last time fewer-than-2,000 caveats were lodged for strata-titled industrial properties was in 2009 at about 1,500.

Ms Chia added that the average capital values of prime freehold conventional warehouse and factory space are expected to remain at their current levels in the next quarter.

The mixed outlook comes on the back of a muted industrial property market here in Q3, despite a stable stream of leasing activity.

Sale transactions of strata-titled industrial properties in Q3 fell by about 36 per cent quarter-on-quarter to 203, according to URA Realis caveats.

DTZ Research said this is way below the 672 strata-titled units that were sold in the same period last year. So far, there has been 842 transactions this year, much lower than the 1,986 in the same 2013 period.

DTZ said the decline in transactions was due to fewer new launches, seller’s stamp duty measures, as well as the implementation of the Total Debt Servicing Ratio (TDSR) framework last June.

Both average capital and rental values of conventional industrial space have also stagnated, while business park rents bucked the trend and continued to rise in Q3.

The average monthly gross rents for business parks continued to increase by 2 per cent quarter-on-quarter in Q3 to S$5.00 per sq ft, said DTZ.

Still, business park rents are lower than office rents and the former is drawing more office occupiers, said Cheng Siow Ying, DTZ’s executive director of business space.

“The difference in rents can be as high as 30 per cent, compared with the average office rents in the decentralised areas,” she said.

The downward pressure on rents for conventional industrial space might continue, said DTZ.

A total of 40.7 million sq ft of industrial space is expected to be completed by 2016, of which 27 per cent are multiple-user factories.

Lee Lay Keng, DTZ’s regional head (South-east Asia) research said the large supply in 2016 is “likely to restrain rental growth”.

“The older business parks may find it increasingly difficult to retain and attract tenants alongside these newer business parks,” said Ms Lee.

CBRE said in its report that the difference in rents between business parks located in the city fringe and those in the rest of the island has widened further in Q3 this year.

Michael Tay, executive director, office services at CBRE said: “Occupiers are more keen on higher specifications, quality developments which the city fringe has been able to provide. The location and connectivity are also important considerations which prompt occupiers to pay the premiums in rent. “

S’pore property outlook challenging until 2020

What does the future hold for Singapore’s property market?

According to a recent Savills report, the outlook remains challenging for the rest of 2014, and this is expected to continue over the next six years.

The report looked at how 12 world cities would perform in 2020 and gave a tough assessment of Singapore.

Although the office sector is still robust with rents increasing by 7.3 percent in the first six months of 2014, the residential market has slowed with values and rents dropping by 4.2 percent and 3.5 percent respectively during the period.

This is due to the government’s cooling measures which are continuing to put pressure on the city-state’s prime residential market.

Savills added: “Market controls are set to be a feature of Singapore over the coming years as it battles market affordability in a bid to remain competitive on the global stage.”

One factor that puts Singapore at a disadvantage is its restricted land supply, which is at odds with the increasing wealth and growing workforce.

Lower value industries may have to relocate across the causeway, where land, property and wages are cheaper.

At the same time, Singapore risks becoming more rarefied or distant from the lives and concerns of ordinary people, with Singaporeans protected by government access to housing.

Meanwhile, employers will face more difficulty in attracting and retaining young talent from overseas due to the high real estate costs.

On a positive note, Singapore’s high-tech infrastructure and proximity to some of Asia’s key growth markets will see it progressing as a world leader in business.

In fact, the World Bank has ranked Singapore as number one for ease of doing business.

The city-state also has a strong reputation in the biotech and energy sector.