Rents for industrial units fall in last quarter

AVERAGE rents for industrial units fell by 1.3 per cent in the last quarter of 2014 from the previous three months, due to weak demand and fresh supply of factory space, said property consultant DTZ.

The take-up in the first three quarters of last year fell to 4.8 million sq ft from 5.3 million sq ft registered for the same period in 2013, as poor outlook for the manufacturing sector took its toll.

The lack of improvement in sentiment among manufacturing firms also likely contributed to the slow take-up rate in the third quarter last year, DTZ said in a report yesterday.

An Economic Development Board survey out in October found that a weighted 85 per cent of manufacturers said they expect the outlook for the six months to March this year to remain the same as that from April to September last year.

Although the Singapore Purchasing Managers’ Index (PMI) rose from 49.7 in August to 51.9 in October in 2014, factory output dropped by 2.8 per cent in November over the same month the previous year, DTZ noted.

An injection of 14.5 million sq ft of factory space to the existing stock in the first nine months of last year also dampened sentiment, yet rents remained stable last year, DTZ figures showed.

Compared with levels in 2013, average monthly rents for traditional industrial space inched up by 1.6 per cent to $2 per sq ft last year. On the other hand, demand for space in business parks and high-tech space continued to increase.

Occupancy rates for business park space rose by 1.5 percentage points quarter on quarter and 7.1 percentage points year on year.

Average monthly gross rents of business parks and high-tech space remained stable at $5 psf and $3.20 psf, respectively, in the fourth quarter.

On a yearly basis, rents for business park space registered the largest increase, at 6.8 per cent from the fourth quarter of 2013.

“Demand for business parks and hi-tech properties were more resilient in 2014,” said Ms Cheng Siow Ying, DTZ’s executive director of business space.

“This is due to the increase in office rents, which motivated some qualifying occupiers to seek out more affordable options in these office-industrial hybrid spaces.

“Tenants prioritising on cost savings and good locations will be willing to pay higher rents for newer and better quality buildings such as those at one-north, Aperia and Mapletree Business City.”

Ms Cheng noted that Galaxis@One North has been well received, achieving close to a 70 per cent pre-commitment rate from tenants that include multinational companies such as Oracle, Canon, Garena and Electrolux.

“As the trend continues, the rental gap between such newer buildings and the older ones will widen,” she said.

Rents for conventional industrial space and older business parks are likely to stabilise or ease this year, while those for newer business parks and high-tech spaces are expected to increase, said DTZ.

Meanwhile, transaction activity for industrial space slowed down, with the number of deals for strata-titled industrial property in the fourth quarter falling almost 20 per cent from the previous quarter.

In all, only 936 properties were transacted last year, nearly 60 per cent below the 2,451 strata-titled transactions registered in 2013.

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