Industrial prices, rentals falling at slower pace: JTC

Latest industrial property figures due to better macro-economic showing: Analysts

The falls in industrial prices and rentals are showing signs of moderation and JTC expects both indices and occupancy rates to "stabilise" as new supply starts to taper in the coming years.

Industrial rents dipped just 0.1 per cent in the fourth quarter of 2017, compared with a decline of 1.1 per cent in the third quarter. For the full year of 2017, rentals fell 2.8 per cent, compared with a full-year decline of 6.8 per cent in 2016.

This was the 11th consecutive quarter of rental decline, although the rate of decline was also the slowest.

As for industrial prices, they fell 1.1 per cent in the latest quarter against the third quarter, leading to a 5.7 per cent decline for the full year. This was still lower than the full-year drop of 9.1 per cent in 2016.

Analysts attributed the latest numbers to the better macro-economic showing, especially with the December Purchasing Managers' Index showing the 16th consecutive month of improvement in manufacturing sentiment. But they also feel that the macro-economic positivity has been slow to trickle down to the industrial property sector.

Director of research at Cushman & Wakefield, Ms Christine Li, noted that manufacturing headcounts and space requirement by industrialists had not grown in tandem, largely because of the structural shift in manufacturing towards high value-added and less labour-intensive activities.

Knight Frank executive director and head of industrial Tan Boon Leong said the industrial market improvement is showing itself in smaller ways: more leasing enquiries, more property viewings, and tenants more confident to commit to leases compared with a few quarters ago.

He added that demand is also starting to emerge from other industries beyond the "star-performer" electronics sector. He has received more enquiries from wholesale trade industries for logistics space, for instance.

Ms Tricia Song, head of research for Singapore at Colliers International, noted that rental performance was not uniform throughout the sector in Q4.

"In particular, business park rents have increased for the third consecutive quarter, by 2 per cent quarter on quarter and ending the year with an annual 3.3 per cent increase. This is due to the limited new business-park supply and increased demand for high-spec space.

"Rents for warehouse space continued to decline the most among the segments for the third consecutive quarter, by 1 per cent quarter on quarter and 5.7 per cent year on year due to the large supply of 10.4 million sq ft of warehouse space that came on-stream in 2017."

On the transaction front too, price performance varied for properties of different lengths of leases.

Cushman & Wakefield's Ms Li noted that prices of multi-user factories with less than 30 years of lease left fell the most, at 2.3 per cent quarter on quarter in Q4. Multi-user factories with leases of more than 60 years saw price increases of 2.3 per cent, while those with 31 to 60 years left saw prices dip 0.5 per cent.

A version of this article appeared in the print edition of The Straits Times on January 26, 2018, with the headline 'Industrial prices, rentals falling at slower pace: JTC'. Print Edition | Subscribe