Prices, rents for industrial space fall amid greater supply

Exterior of JTC Space @ Tampines North offering flexible configuration space with high technical specifications and designated vibration-sensitive space to support the productivity, competitiveness and growth of industries and enterprises.
Exterior of JTC Space @ Tampines North offering flexible configuration space with high technical specifications and designated vibration-sensitive space to support the productivity, competitiveness and growth of industries and enterprises.PHOTO: ST FILE

The increased supply of industrial space continues to put pressure on prices, rents and occupancy rates, according to JTC data yesterday.

There were falls across the board in the third quarter, pointing to the fragile economy, particularly for manufacturers.

Ms Tay Huey Ying, JLL head of research for Singapore, said: "The prolonged weakness in the manufacturing sector continues to take a toll on industrial rents."

She said the warehouse sector was the worst hit, with rents posting a "steep fall" of 4.4 per cent from the second quarter. "This steep decline in rents can be attributed to the weak global trading conditions that has weighed down demand for warehouse space... warehouse rents can be expected to stay under the weather for several more quarters," she said.

JTC's third-quarter report noted that prices for all industrial space fell 1.7 per cent in the third quarter from the second, while values in the multiple-user factory category slipped 1 per cent.

The year-on-year picture points to a steady rate of decline. The price index for all industrial space dropped 7.8 per cent from the third quarter last year and declined 5.8 per cent for multiple-user factory sites. This was in tandem with a 1.7 percentage point drop in occupancy rates, JTC said.

Rents for all industrial space fell 2 per cent from the second quarter, while rents for multiple-user factory space slipped 1.3 per cent. The rental index for all industrial space dropped 7.3 per cent year on year, and 8.3 per cent for multiple-user factory space.

The occupancy rate for the overall industrial property market fell by 0.3 percentage points to 89.1 per cent from the second quarter. Occupancy was 1.7 percentage points lower than in the same period last year.

About three million sq m of industrial space - including around 720,000 sq m of multiple-user space - is expected to come on the market from now until the end of next year. JTC noted that this is higher than the average annual supply of about 1.9 million sq m and demand of about 1.2 million sq m in the past three years.

"This is likely to exert further downward pressure on occupancy rates, prices and rentals, translating to reduced business cost for industrialists," it stated.

A version of this article appeared in the print edition of The Straits Times on October 28, 2016, with the headline 'Prices, rents for industrial space fall amid greater supply'. Print Edition | Subscribe