Business park rents up for 5th straight quarter

Rents rise 0.5% in second quarter but good performance not shared by all in segment

Business park rents have risen 0.5 per cent, the fifth straight quarter of growth and the strongest showing among the various types of spaces here, JTC said in its second-quarter industrial property report issued yesterday.

These would likely help the fortunes of the likes of Ascendas Reit and Soilbuild Business Space Reit, said Mr Derek Tan, senior vice-president for DBS group equity research.

Business parks have seen strong demand from the IT and media industry, and there has been a limited supply coming onstream, he said.

But Mr Tan and other analysts also noted the good performance was not shared by all business parks.

Head of research for Singapore at Colliers International Tricia Song said newer properties in choice locations remain popular while older ones are still struggling to fill up.

"This could explain why business park rents have risen for five consecutive quarters, a cumulative increase of 7.5 per cent, but occupancy has actually fallen for the third quarter, to 85 per cent," she said.

A closer look at geography and lease length reveals a mixed picture.

  • 3.3%

  • Rise in rental prices for factories with leases 60 years or longer, compared with a 0.8 per cent decline in those for factories with 30 or fewer years left on the lease.

Rental prices for factories with leases 60 years or longer rose by 3.3 per cent, compared with a 0.8 per cent decline in those for factories with 30 or fewer years left on the lease. Moreover, prices in the central region rose 2.8 per cent while other areas posted a negative or less than 1 per cent increase over the past quarter.

"Investors are interested in freehold factory space, especially in central areas, due to the potential upside when planning parameters change," noted Dr Lee Nai Jia, senior director and head of research at Knight Frank Singapore. "Separately, those purchasing for operations will look for the units with shorter leases, that meet their requirements."

Overall, rents slipped by 0.1 per cent. After business parks, the next best performer this quarter was the multi-user factory segment, which rose 0.2 per cent, the first rise since edging up in the first quarter of 2015.

This was on the back of "more upbeat business sentiment alongside the positive economic and manufacturing data, which has emboldened more tenants and industrialists to review their real estate options", said JLL's head of research and consultancy in Singapore Tay Huey Ying.

Ms Christine Li, head of research and consultancy at Cushman & Wakefield, said imposition of tariffs on Chinese exports could bring manufacturing activity to South-east Asia. While the low-cost production lines are expected to move to places such as Vietnam and Thailand, high-tech manufacturing activity could conceivably make its way to Singapore to tap its skilled workers.

A version of this article appeared in the print edition of The Straits Times on July 27, 2018, with the headline 'Business park rents up for 5th straight quarter'. Print Edition | Subscribe