The supply of industrial land is being reduced slightly for the first half of next year, given the more balanced market in terms of rent and prices.
Six sites will be launched on the confirmed list and seven on the reserve list. They have a total area of 12.56ha, it was announced yesterday.
This is a slight dip from the eight confirmed and six reserve list sites, with a total area of 13.9ha, that were launched in the second half of this year.
In the first half of this year, six confirmed sites and five reserve plots spanning 11.25ha in all were released for sale.
JLL head of research and consultancy Tay Huey Ying said the Industrial Government Land Sales programme for the first half of next year reflects the Government's sensitivity to the still-fragile state of the industrial property market despite the uplift in economic and trade conditions.
While the manufacturing purchasing managers' index has been in expansionary mode for 15 consecutive months and landlords are reporting more leasing inquiries, analysts think rents still have some way to fall before they bottom out next year.
DBS senior vice-president for group equity research Derek Tan noted in a recent report that the recovery in the industrial market is "uneven" as some firms are still looking to consolidate or downsize their space to remain cost-efficient.
All the confirmed list sites in the latest launch are zoned for heavier industrial use and come with 20-year tenures. They are also all less than a hectare in size. This shows that the Government is targeting to meet demand from industrialists and end users as opposed to developers and investors, who prefer light industrial, longer-lease properties.
The larger, 30-year leasehold plots meant for developers have been kept on the reserve list.
Developers did not trigger any of the larger sites or the 30-year leasehold ones on the reserve list for sale in this half.
This may indicate their lack of appetite for development land and could have prompted the Trade and Industry Ministry to exclude such plots from the confirmed list.
Ms Tay said the allocation for the first half of next yearwould allow the market time to soak up the available space amid the more upbeat economic outlook.
"This would help to mitigate any downward pressure on industrial rents and prices in 2018."
JTC data for the third quarter showed that overall industrial rents fell for the 10th straight quarter, while the islandwide vacancy rate hit a decade high of 11.4 per cent.
Many observers think the market could be at the tail end of the spike in supply completions, which started from 2014 and peaked this year.
Net new supply - meaning completions less withdrawals due to demolition, change of use or other reasons - have likely exceeded two million square metres for this year. This refers not just to completions on state land, but also those on private land, redevelopments and land allocations from JTC Corporation.
Because construction of new property has been slower in the last couple of years due to a weaker manufacturing environment and consequent weaker demand from industrialists, supply completions from next year onwards are expected to taper off.
ZACD Group executive director Nicholas Mak said the Government may have opted to put the larger sites of 2ha and above on the reserve list to prevent a possible glut.
He thinks that at least one reserve list site could be triggered in the next six months, given the complete absence of bigger sites on the confirmed list.