Some bright spots as demand for industrial space slows

Subdued industrial property demand amid a slowdown in the manufacturing sector looks set to continue this year but there are bright spots amid the gloom, according to property consultants CBRE Research.

It noted that manufacturing output contracted for the 13th consecutive month in February, while factory and warehouse rents in the first quarter also fell, the third straight quarter of decline.

"Occupiers held off expansion plans, while relocations dwindled... Given the subdued manufacturing environment, indus- trialists' focus has largely been on optimising operations and cost reduction," CBRE said in its report.

It said vacant possession sales have risen over the past few quarters as occupants moved abroad or consolidated their operations in a single location. It added that this number is "likely to rise".

Over the past year, Japanese chemical firm Teijin, British sugar conglomerate Tate and Lyle and rigging equipment supplier KTL Global have all shut operations here, with KTL Global choosing to relocate to Malaysia.

"This will lead to an increase in saleable assets. However, buyers will be in short supply, given the challenging rental market and government anti-speculative measures," CBRE noted, adding that a preliminary tally of industrial investment sales in the first quarter came in at $131.72 million, down 75.4 per cent from the same period last year.

But some bright spots remain in the e-commerce and logistics sectors, and data centres.

"Interest in setting up data centres in Singapore remains healthy, given its well-established infrastructure and strong connectivity," said Ms Brenda Ong, executive director of industrial and logistics services at CBRE. She cited LinkedIn's data centre in Jurong, its first outside the United States, which opened recently.

Ms Ong added that the growing need for more specific requirements, such as cold chain logistics and the emergence of e-commerce, help to grow the industrial and logistics space.

CBRE expects greater regional integration through the Asean Economic Community and Trans-Pacific Partnership to also be a boon for the logistics sector.

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A version of this article appeared in the print edition of The Straits Times on April 19, 2016, with the headline Some bright spots as demand for industrial space slows. Subscribe