Times are good for tenants such as Mr Matthew Goh, owner of a warehousing and logistics firm.
Until September, his company was occupying a 2,100 sq ft Basement 1 unit in Lorong Bakar Batu in MacPherson, for about $1.70 per sq ft per month (psf/mo).
He left when the landlord wanted to hike rents to $2.10 to $2.20 psf/mo for a two-year lease, and has now found a 1,700 sq ft Basement 1 unit at Ark@Gambas in Sembawang for a bargain - $1.20 psf/mo.
"We didn't negotiate much with the landlord, a private owner, but other units are also going for the rent we are paying - $2,000 a month," he said.
Many of these neighbouring units were vacant when The Straits Times visited on Thursday. The project was completed in the fourth quarter of last year. On the first floor, 23 of 40 units were for sale or lease.
Experts point to this as a harbinger of more vacancies to come. In the Gambas area alone, at least three other multiple-user factory projects are for sale and under construction.
"It's a fact that the market is full of empty units. There is a lot of stock and end-users are very few, so users have the choice of variety and pricing," said Mr Lim Kien Kim, senior associate director of business space at OrangeTee.
Demand has shrunk because of
recent weakness on the trade and manufacturing front. Activity in factories shrank last month for a fifth straight month, for example.
"Going into next year, it will be a tenants' market. Tenants will have a bigger pool to choose from, in terms of unit type and location," said Mr Lim.
A Knight Frank survey of three planning areas found that leasing transactions and median rents have been generally declining over the past three quarters. In Sembawang, median rents were down from $1.31 psf/mo in the first quarter to $1.24 psf/mo in the current quarter.
Some strata industrial unit owners are not getting the rents they were promised when they bought the units. Much has been written about Oxley Bizhub, for example, where investors were promised rents of up to $4 psf/mo. Average rents over the past six months there were about $2.40 psf/mo.
Some owners who have not been getting rental support and pressured to sell have been turning to the auction market.
A total of 115 industrial properties were put up for auction so far this year, an 83.3 per cent rise from last year, according to Knight Frank.
Of these, 33 industrial properties were non-owner sales - including mortgagee sales, receivership and liquidator sales - compared with just 18 last year.
All of these non-owner sales were strata-titled industrial units with a mix of old and recently completed projects, said Ms Catherine Ng, associate director (industrial) at Knight Frank Singapore.
On balance, though, owners do not seem to be selling at a loss.
A sample by Savills of five industrial properties in Woodlands and Yishun - A'Posh, 7, 9, 11 North Spring and North Point - found almost all transactions made money.
This could be because prices have run up so much over the years that even with the current softer market, sellers would still be in the money, said Savills Singapore research head Alan Cheong.
"Many of the first purchasers bought into these projects at the start of the price run-up in 2011."
Using a general guide, the JTC multiple-user factory price index rose about 55.7 per cent from the first quarter of 2011 to the third quarter of this year. "Therefore, even if rents are soft and vacancies high, the entry price and quantum paid by the first purchasers are relatively low, giving them enough buffer and confidence to gloss over the weaker fundamentals," he said.
The vacancy rate for multiple-user factories was flat at 12.7 per cent in the third quarter, compared with 12.6 per cent in the second quarter.
Seventeen strata-titled industrial developments, or a total of 7 million sq ft of gross floor area (GFA), were completed from last year to the third quarter of this year, Ms Ng noted.
The north region saw the highest proportion of new and recently completed strata-titled projects, followed by the west region.
Another 1.1 million sq ft or so of GFA will be completed this quarter, with a bumper 7.6 million sq ft GFA next year, said Mr Ku Swee Yong, Century 21 chief executive.
Take-up so far is below these numbers. Take-up was about 3.6 million sq ft last year and about 3.3 million sq ft over the first three quarters of this year.
"It is tough to expect next year's take-up rates to be equal to this year's, as manufacturing activities have slowed since the middle of this year," said Mr Ku.
He expects the vacancy rate to top 14 per cent next year.
While existing investors should do their due diligence on potential tenants, they should also be open to offers in this market, advised Mr Lim. They could consider shorter lease terms and adjust effective rates by giving longer fit-out periods.
"But it is a good time for end-users looking to acquire, as values have come off," he said. For example, prices at Oxley Bizhub, which hit highs of nearly $800 psf in 2012, are now just above $500 to $600 psf.
Said Mr Lim: "There is never a good or bad time to buy or sell because prices would always be adjusting according to market conditions. So my advice is: Don't wait for the market to bottom out. Instead, look at the relevance of the property in question, for your business."