Industrial property market cools giving tenants a headsup

According to Straits Times last Sat, times are good for tenants as market cools for industrial properties. In Ark@Gambas in Sembawang, many of these neighbouring units were vacant. The project was completed in the fourth quarter of last year. On the first floor, 23 of 40 units were for sale or lease.Some tenants managed to get a good bargain for some units due to the situation.

This could be a harbinger of more vacancies to come. In the Gambas area alone, at least three other multiple-user factory projects are for sale and under construction.

Demand has shrunk because of recent weakness on the trade and manufacturing front. A Knight Frank survey of three planning areas found that leasing transactions and median rents have been generally declining over the past three quarters. In Sembawang, median rents were down from $1.31 psf/mo in the first quarter to $1.24 psf/mo in the current quarter.

Some strata industrial unit owners are not getting the rents they were promised when they bought the units. Much has been written about Oxley Bizhub, for example, where investors were promised rents of up to $4 psf/mo. Average rents over the past six months there were about $2.40 psf/mo.

While existing investors should do their due diligence on potential tenants, they should also be open to offers in this market. They could consider shorter lease terms and adjust effective rates by giving longer fit-out periods.

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