Category Archives: Industrial

CFE calls for government to review land use and planning guidelines

The Committee on the Future Economy (CFE) calls for greater land-use flexibility by allowing complementary activities to be located near each other–  value chains and industries can be integrated and synergies enabled among developments in a precinct.

Given the blurring line between services and manufacturing, the CFE also proposed that flexibility of land use be allowed in industrial areas as this will open the way for businesses of different sectors and functions to co-locate, find synergies and catalyse innovation.

The Urban Redevelopment Authority (URA) is working with state industrial landlord JTC and the Economic Development Board (EDB) under Ministry of Trade and Industry.

Industry players say Singapore may need to create more zoning categories or expand existing definitions of use for industrial space.

Another planning guideline – that of the “60-40 rule”, which requires at least 60 per cent of gross space in a building or strata unit to be used for industrial activities, with at most 40 per cent left for ancillary purposes – is another restrictive policy that needs review.

The government has, in the past, rolled out “white” sites and business park white zones in the Master Plan to offer developers some autonomy in deciding the most appropriate mix of uses for each site. However, it has remained prescriptive in listing permissible uses and planning specifications for these sites.

The US practises what is called “performance zoning”, under which land development and use are circumscribed by performance standards; for example, these standards can limit the intensity of development by stipulating the maximum level of noise or strain on the transportation system.

 

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Is Singapore’s Reit story sustainable?

Singapore’s real estate investment trusts became popular because they had the things local investors love — steady income, high yields and property. With most annual reports in, the picture for the industry isn’t inspiring. Indicated dividend yields have continued untouched even as return on assets has plunged.

As interest rates rise, investors will demand even higher dividend yields. At the same time, because the REITs owe more, they’re more impacted by higher interest payments.

Meanwhile, property prices have plunged. Last week it was reported that six industrial-property REITs recognized a collective drop in the value of their assets of S$296.3 million ($208.5 million) in 2016, enough to wipe out all the gains they booked since 2012.

 The URA index shows that rents for shops in the central region of Singapore has fallen 11 % in the past two years – back at the level it was a decade ago.

Currently, some 20 listed REITs’ shares are trading below 70 % of net asset value. Some, like Saizen REIT, are trading at deep discounts to net asset value because they have already agreed to sell their property holdings. Others, like Sabana Shariah Compliant REIT, are studying similar options.

This confirms the worst fear: that the current population of publicly traded REITs in Singapore is unsustainable.

 

All HDB industrial properties to JTC by 2018

By the first quarter of 2018, all 10,700 industrial units and 540 land leases under the Housing & Development Board (HDB) will be consolidated under JTC, a single agency offering one-stop access to a full range of Singapore’s public-sector industrial facilities.

The properties will be transferred from HDB’s portfolio to JTC’s at net book value.

Minister for Trade and Industry Lim Hng Kiang said this will better support small and medium-sized enterprises (SMEs) in their business growth.

The government will be able to undertake more comprehensive master-planning of industrial estates across Singapore; the move will also facilitate more efficient clustering of complementary activities and integration of activities along the value chain.

JTC wants to bring HDB tenants under its fold to offer them the same support that JTC tenants under the parentage of the Ministry of Trade and Industry enjoy, and to enhance their productivity and transform them into more competitive enterprises. (HDB falls under the Ministry of National Development.

One common problem HDB industrial tenants face lies in finding adjacent space into which to expand; many end up taking space in multiple venues, sometimes across the island. What JTC can offer SMEs is contiguous large floor plates in its own facilities.

It can also help SMEs plan ahead, by charting their growth trajectories and anticipating their future needs. JTC can provide, not just bigger spaces, but also land for expansion.

Guoxin Manufacturing is one example of an HDB tenant that is moving into a 1,180 sq m space at JTC Space @ Tampines North; this is twice the amount of space it used to occupy over five different units in Tuas and Ubi.

All HDB tenants and lessees affected by the consolidation will continue to be served by the same team of 160 HDB officers, who will be transferred to JTC. JTC also gave the assurance that the contracted terms and conditions of their tenancies and leases with HDB will remain.

 

Marine and Energy Service Provider selling 5 industrial sites

Wartsila Singapore, which provides services for the marine and energy power plant sectors, was looking to sell five industrial properties in the west. The sites at 11 Pandan Crescent and 14 Benoi Crescent were considered to be sold with leaseback arrangements.

The other three att 43, 45 and 47 Gul Drive were marketed to be outright sales with vacant possession on completion.

The Finland-listed Wartsila is reducing its asset load to focus on core operations, and has also sold assets in Finland. Wartsila Singapore, which was set up here in 1982 and has more than 1,000 employees, plans to lease back the properties at 11 Pandan Crescent and 14 Benoi Crescent and continue to house its staff here.

There was intention to spend about $20 million on 11 Pandan Crescent – which has three factory-cum-workshops, a canteen and a five-storey ancillary office block, and land area of about 35,500 sq m, including 3,110 sq m of waterfront land facing the Pandan River.Wartsila will also spend about $6 million on 14 Benoi Crescent, which has a front-facing three-storey ancillary office block, and a single-storey factory-cum-workshop at the back, with a land area of about 9,860 sq m. The indicative asking prices were $40 million for 11 Pandan Crescent and $11 million for 14 Benoi Crescent.

The two sites could also attract developers and fund managers who are looking for high-yielding assets with (a) strong tenant brand name and stable income to add to their industrial portfolio.

The asking prices were $8 million for 43 Gul Drive, $6.4 million for No. 45 and $5.7 million for No. 47. They range from $230 psf to $288 psf on existing floor areas. The divestment via an expression-of-interest exercise closed at 3pm, on Friday, Oct 14.

New Future-abled CBD in Jurong

SINGAPORE’S second central business (CBD) district, the Jurong Lake District (JLD), will feature adaptable spaces for the future economy, given that business cycles will be shorter, and that businesses will have to adopt rapidly emerging technologies and more flexible business models. Such occupiers may find rentals of office space too high and the set-up too restrictive for creative juices to flow.

As Singapore’s second central business district, the JLD will consist of a core area around the Kuala Lumpur-Singapore High-Speed Rail (HSR) terminus. The area will comprise high-quality office spaces with mixed uses and be surrounded by clusters of business parks that provide flexible and adaptable work spaces for a good mix of complementary businesses and services of varying sizes. Examples include research and development facilities, educational and training institutes, small and mid-sized firms, business incubators and investment firms.

In launching its request for proposal (RFP) and inviting multi-disciplinary teams to develop master plan proposals for the JLD, the URA also unveiled a third new precinct in the district. Called Lakeside Gateway, this precinct has been envisioned as a mixed-use business precinct and home to the HSR terminus, which will anchor the JLD as “a district of the future” and Singapore’s second CBD.

A large part of the 112-hectare precinct is occupied by the Jurong Country Club, which has been acquired by the government. The JLD’s two other precincts unveiled earlier are the commercial hub of Jurong Gateway and the leisure precinct of Lakeside. In the longer term, Lakeside Gateway could be integrated with the surrounding areas such as the International Business Park, Teban Gardens and Pandan Gardens.

A key guiding goal in the master planning of the JLD is to achieve a more aggressive public transport mode share – one that is higher than the national target, which is 75 per cent by 2030. It will be distinguished by its high connectivity, accessibility and environmentally-friendly features, where smart and green mobility options are the choice modes of commute.

From among the multi-disciplinary teams participating in the RFP, the URA will shortlist up to five teams, which will develop their Concept Master Plans for JLD. When this is done, they will each receive an honorarium of S$200,000.

The team with the best Concept Master Plan will be appointed in February 2017, and work with the URA and partner agencies to draw up the Draft Master Plan for the JLD. There will be an exhibition of the Draft Master Plan around the third quarter of next year, during which the public will be invited to give feedback. After that, the appointed team will work with the URA to refine the plans. When this has been done, the team will be awarded S$2 million.

 

Industrial property prices drop after 4 years

Industrial property prices eased last year after rising for 4 straight years. Rents fell consecutive for 2 years. The current gloomy manufacturing scene and supply glut in the near term should lead to further moderation in prices and rents. Industrial property prices fell 1.5% in Q4 from the preceding quarter, resulting in a full year fall of 1.7%. In the preceding year, the prices rose 3.5% in 2014.  Vacancy rate islandwide rose 0.2% to hit 9.4% in Q4. This is the highest in 3 years. About 2.9 million sqm of industrial space will be ready this year, to be added another 1.6 million sqm next year.  Average annual supply and demand of industrial space were just around 1.7 million sqm and 1.2 million sqm respectively over the past 3 years.

Data Centres Shine amid Property Gloom

In the current gloomy property market, one sector shines as a bright spot. Data centre market are attracting more interest as a result of higher demand among finance and tech companies, not to mention the push by the Singapore government. The market size is expected to hit $1.8B in 216, a 25% increase over that in 2014.