Like many industrial businesses, hydraulic cylinder maker OE Manufacturing is struggling - and this stagnation is feeding through to rapidly sliding rents and values.
"My trade is very much involved with the oil and gas industry, and quite badly affected by depressed oil prices. I don't think I will be looking at any expansion in the next few years," said company founder and managing director James Wong.
Sentiments such as Mr Wong's are common among industrialists, with their lacklustre demand for space translating to decreases in both rental levels and property values.
Rents of industrial space fell 2.7 per cent in the first quarter after falling 1.1 per cent in the fourth quarter of last year, JTC data released yesterday showed. Rents are down 5.1 per cent from a year back.
Property prices fell 2.5 per cent in the first quarter after sliding 1.5 per cent in the fourth quarter, and are 4.8 per cent lower than a year earlier.
"The sharp rental decline is a very telling sign that the manufacturing sector is suffering," said Savills Singapore research head Alan Cheong.
For instance, factory output shrank in 12 of the last 13 months, according to data earlier this week.
The sharp rental decline is a very telling sign that the manufacturing sector is suffering.
SAVILLS SINGAPORE RESEARCH HEAD ALAN CHEONG
Across all types of industrial properties, the vacancy rate climbed for a third straight quarter to the highest level in nearly 10 years. It rose 0.5 percentage points to 9.9 per cent, the highest since it reached 10.3 per cent in the second quarter of 2006.
This rise came as 239,000 sq m of new factory space was completed in the quarter but new demand was just 82,000 sq m - the lowest level of new demand since the first quarter of 2013, noted SLP International executive director Nicholas Mak.
For industrial firms just starting out or facing leases that are expiring, falling rents and more available space are ideal. But the uncertain market situation means that most will not be tempted to relocate, especially given the cost of moving, said Singapore Manufacturing Federation council member John Kong.
In the marine services industry, for example, companies are simply keeping status quo in terms of real estate, said Singapore Association of Shipsuppliers and Services president Danny Lien. Just one or two of about 70 members have shifted offices in the past year.
The Jurong and Tuas area saw a large jump in vacancy rates of multiple-use factories over the past year - up from 18 to 24 per cent.
This means median rents fell by about 19 per cent, from $19.32 per sq m (psm) a month to $15.63 psm a month, said JTC. "For a small unit of around 200 sq m (2,153 sq ft), annual savings could be about $9,000. For a larger unit of 1,000 sq m (10, 764 sq ft), savings could be as high as $44,000."
In the business park sector, rents fell 1 per cent from the fourth quarter and fell 2.5 per cent from a year back. Financial institutions are largely putting expansion plans on hold, with many undergoing consolidation, said JLL head of research for Singapore Tay Huey Ying.
Prices, rents and occupancy rates will stay under pressure, with 2.4 million sq m of space completing for the rest of this year and another 1.8 million sq m next year - far higher than average annual supply and demand of 1.8 million sq m and 1.2 million sq m in the past three years.
Industrial prices and rents could fall by 7 to 10 per cent for the whole of this year, said Colliers International senior associate director of research and advisory Anthea To.