Industrial rents and prices continue to fall in Q1

The recovery in trade and manufacturing has yet to translate into higher demand for industrial space, with prices and rents continuing to fall in the first quarter.
The recovery in trade and manufacturing has yet to translate into higher demand for industrial space, with prices and rents continuing to fall in the first quarter. PHOTO: ST FILE

The recovery in trade and manufacturing has yet to translate into higher demand for industrial space, with prices and rents continuing to fall in the first quarter.

Overall industrial rents dipped by 0.9 per cent from the last three months of 2016 to the first quarter, while prices declined by 2.2 per cent over the same period, according to JTC data yesterday. Rents were down 5 per cent in the three months to March 31, compared with the same period last year, while prices slumped 8.9 per cent.

"The performance of the manufacturing sector has a lagged effect on the demand for industrial space," said Mr Lee Nai Jia, head of South-east Asia research at Edmund Tie & Company.

Occupancy rates also dropped marginally to 89.4 per cent in the quarter - down from 89.5 per cent in the fourth quarter and 90.1 per cent in the first quarter of 2016.

Consultancy JLL noted that firms are generally cost-conscious with their real estate needs, "given the still fragile economic and business conditions as shown by the slowdown in leasing transactions".

There were 1,826 leasing transactions in the first quarter, down by 9.2 per cent from the fourth quarter, JLL said, citing URA Realis data.

The industrial property market is expected to remain subdued in the coming quarters, in view of the 2 million square metres of space that will become available this year.

The influx of new space is higher than the average annual supply of about 1.8 million sq m and average demand of 1.3 million sq m in the past three years, JTC said. "This is likely to exert further downward pressure on occupancy rates, prices and rentals, translating to reduced business costs for industrialists," it said.

Mr Nicholas Mak, head of research and consultancy at SLP International Property Consultants, noted that the first-quarter drop in prices for industrial space was the eighth straight quarter of decline. "Declining rentals and ample supply of industrial space have caused some users to rent rather than buy. This has also contributed to weaker buying demand," he said.

The price fall in the first quarter was led by single-user factories, which eased by 3 per cent from the fourth quarter, while multiple-user factories saw a 1.8 per cent drop.


Correction note: In an earlier version of the story, we said that the influx of new space is higher than the average demand of 1.3 sq m in the past three years. This is incorrect. It should be 1.3 million sq m. We are sorry for the error.   

A version of this article appeared in the print edition of The Straits Times on April 28, 2017, with the headline 'Industrial rents and prices continue to fall in Q1'. Print Edition | Subscribe