Effects of cooling measures on industrial properties beginning to show

The first quarter of the year is traditionally a quiet period for the industrial property market. However, market sentiment seems a little different this year.

Data from Knight Frank shows that sales volume of strata-titled factory space in the first quarter this year is 26.5 per cent lower than the same period last year.

Knight Frank’s latest report analysed caveats lodged up till March 15.

Despite the sharp drop in demand from the fourth quarter of 2012, prices of new factory spaces fell only moderately. Prices for 30-year leasehold factory units fell by 4.2 per cent and those with 99-year leasehold declined 1.6 per cent. Prices fell four per cent for a 60-year lease hold unit and 3.5 per cent for a freehold unit.

This is despite the government imposing Sellers’ Stamp Duty of 15 per cent on properties sold within the first year of purchase.

Alice Tan, senior manager at Knight Frank, said: “We see that price trends generally would exhibit a laggard effect to regulations and measures. So once the prices start take effect due to cooling measures, which would happen over the next two quarters, hopefully the government will not launch any more cooling measures.”

Other market watchers like Savills Singapore are forecasting industrial property prices — which is made up of 70 per cent factory space and 30 per cent warehouse — to decline by 10 to 15 per cent this year.

According to Knight Frank, rentals of factory space have increased by five per cent in Q1 2013 from Q4 2012 to S$2.13 per square foot islandwide.

Knight Frank noted that the newer strata-titled factory spaces have commanded higher rentals, but with 24 million square feet of new supply coming up in the remaining 2013, rental increase is likely to be capped.

While more tenants may be interested in newer spaces, those with tighter rental budgets may go for older buildings — should the rental difference between the newer and older space widen further — where rents have slipped by 10 to 15 per cent, depending on location.

Dominic Peters, who is the industrial real estate director for Savills, said: “In locations where there are a great demand that outbids supply — Woodlands, Kaki Bukit, Ubi — there will be a drop in rentals as expected. In locations like Lavendar, Henderson areas, where it is out of CBD, I think rentals will still hold or maybe ease a bit in the next quarter.”

According to the URA Price Index, industrial property rentals rose 3.9 per cent in the fourth quarter of 2012 from the preceding quarter, outstripping the 1.2 per cent quarter-on-quarter rise in July through September.

URA is expected to release final first quarter property data on April 26.

Source : Channel NewsAsia – 8 Apr 2013

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