Industrial property unscathed by global economic woes

Singapore’s industrial leasing market has managed to overcome global economic woes to record another quarter of growth, as relocations, company expansions and existing businesses’ new set-ups continue to lend support to market demand.

According to the Urban Redevelopment Authority’s (URA) real estate statistics for the third quarter, prices and rentals of multiple-user factory space climbed 6.7 percent and 2.1 percent in Q3, compared to 5.7 percent and 4.5 percent respectively in Q2.

“The relatively stable occupancy levels for industrial space provided support for rents to strengthen further, albeit at a moderated rate of 2.4 percent in 3Q 2011, compared with the 5.7 percent quarter-on-quarter growth in 2Q 2011. This is the second consecutive quarter of rental growth moderation since the first quarter of the year,” said Chia Siew Chuin, Director of Research & Advisory at Colliers International.

Data from Colliers also showed that average monthly gross rents for prime multi-user factory and warehouse space climbed four percent to 4.7 percent quarter-on-quarter in Q3, reflecting a healthy moderation from the 6.4 percent to 7.7 percent quarter-on-quarter growth recorded respectively in the previous quarter.

Meanwhile, occupied factory space increased 118,000 sq m in Q3, from the 110,000 sq m increase in the previous quarter. On the other hand, the stock of factory space rose 93,000 sq m in Q3 and the vacancy rate of factory space was 7.0 percent as of Q3.

Li Hiaw Ho, Executive Director of CBRE, said that net absorption moderated from 133,000 sq m in Q2 to 105,000 sq m in Q3.

“Less warehouse space was injected into stock during the third quarter, which could have affected the net absorption. Only 13,000 sq m was added to warehouse stock in Q3, down from the record high 187,000 sq m in Q2 and the 34,000 sq m in Q2.”

As of end-Q3, the URA said that the total supply of factory space from projects in the pipeline had approximately 3.298 million sq m of gross floor area (GFA). Of these, about 3.153 million sq m were expected to be completed between 2011 and 2013.

Furthermore, Colliers said the outlook for the industrial property market is currently being weighed down by a global economy that is mired in a vicious cycle of weakening confidence and falling output due to the persistent debt issues in the US and Eurozone.

“However, some positive factors could continue to lend support to the industrial property market. The unresolved economic problems in the US and Eurozone could continue to divert some investor interest to Asia, given her conducive investment environment and a triple-A credit rating,” it said.

CBRE also expects rents and capital values to remain stable over the next three months. The cautious mood in Q3 will likely continue in the coming quarter, while activity in Q4 is expected to be limited and comprise mainly of renewals and consolidation rather than expansion.

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