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Outlook for S'pore industrial space stable: analysts

25 January 19 | The Business Times


THE latest industrial property market statistics from JTC Corporation point to the best annual performance in four years, according to some property consultants who suggest that the segment may have bottomed.

However, others expect the current stabilisation phase of the market to continue, possibly for a couple of years.

The industrial land and infrastructure agency's latest data shows that rentals and prices of overall industrial space in Singapore remained unchanged in the fourth quarter of 2018 over the preceding quarter. Compared with a year ago, the price index was also unchanged while the rental index eased 0.3 per cent.

Meanwhile, the occupancy rate of the overall industrial property market for the fourth quarter of last year rose by 0.2 percentage point to 89.3 per cent compared with the previous quarter. Compared with a year ago, the occupancy rate increased 0.4 percentage point.

Said JLL's head of research and consultancy for Singapore Tay Huey Ying: "For the first time since Q1 2015, both the All Industrial property rental index and All Industrial property price index (which tracks price movements of single-user and multi-user factories) held steady. This ended 14 successive quarters of rental decline and extended the stability in price for the fourth straight quarter.

"At the same time, the islandwide occupancy improved for the second consecutive quarter to a seven-quarter high of 89.3 per cent in Q4 2018, as the slowdown in new completions allowed net absorption to outpace net new supply for the second consecutive quarter."

Ms Tay argued that overall, 2018's industrial property market annual performance was the best showing in four years as JTC's All Industrial property price index ended 2018 on a stable footing, after falling for the preceding three years.

On the back of a pick-up in leasing activities, JTC's All Industrial property rental index recorded only a marginal 0.3 per cent full-year drop after tumbling between 2.1 per cent and 6.8 per cent annually for four straight years (2014 to 2017).

Based on rental records from JTC's J-Space portal, the 10,473 leasing transactions in 2018 was up 14.6 per cent year-on-year, and the highest annual leasing volume captured since the start of the series in 2000. "This supported the rise in the islandwide occupancy rate from 88.9 per cent as at end-2017 to 89.3 per cent as at end-2018," said Ms Tay.

JTC also said that based on the number of caveats lodged for industrial properties, the transaction volume in the fourth quarter of 2018 was down 5 per cent from the previous quarter, but up 34 per cent year-on-year.

This year, another 1.5 million sq m of industrial space, including 303,000 sq m of multiple-user factory space, is estimated to come on-stream - this is about 3 per cent of the current industrial stock. In comparison, the average annual supply and demand for industrial space in the past three years were around 1.4 million sq m and 1.1 million sq m respectively. "With more supply coming on-stream, it will continue to support the expansion plans of industrialists, JTC said.

ZACD Group executive director Nicholas Mak highlighted that out of the total expected completion of industrial space this year, an estimated 1.306 million sq m will be factory space (including business park space). "Based on the historic annual three-year (2015 to 2017) demand for factory space of 940,000 sq m per year, there could be a temporary oversupply this year.

"The Singapore industrial property price and rental indices should continue to stabilise in 2019 with some slight downward pressure due to the strong supply of new completions and economic concerns. Some of the dark clouds in the horizon include slower global economic growth and the uncertainties caused by US-China trade tensions that will impact an open economy like Singapore that is heavily reliant on trade."

As a result, Mr Mak said he predicts that industrial property prices and rentals will move sideways this year and next.

Knight Frank Singapore executive director and head of industrial, Tan Boon Leong, also said he expects rents and prices this year to remain largely unchanged, as more industrialists review their space needs and space-use strategies. On a positive note, he noted that "more companies are seeking to set up their regional headquarters in Singapore, given its infrastructure, political stability, business-friendly environment and connectivity to the growing South-east Asian region.

"The market remains segmented, with data centres, buildings with high specifications, and central kitchens - factories within food zones - continuing to be in demand. We anticipate the trend to continue in 2019."

Dominic Peters, senior director of industrial services at Colliers International, said: "We think industrial rents in general have bottomed, but recovery would likely be two-tiered, with high-spec and business park space to fare better due to the spillover effect from a sharp office rent recovery in 2018 and further office rental upside in 2019."

CBRE's executive director of industrial and logistics services Brenda Ong said: "While data has shown that the industrial market is reaching equilibrium, it is not across all segments. There is a stronger preference for industrial assets that are well located and with better specifications. This is as they cater to industries that have shown better output performance.

"We may also see more landlords undertaking redevelopment or asset enhancement initiatives for older, obsolete buildings. This is to future-proof buildings to attract tenants in the high value-adding industries."