Govt slams brakes on industrial land supply

THE Government has moved to apply the brakes on the industrial land sales programme.

Following the move to curb supply of land for private homes and commercial space, the Ministry of Trade and Industry (MTI) said it would move the remaining site – at Tampines Industrial Ave 4 – on the confirmed list for this year to the reserve list, and suspend its confirmed list of sites for sale in the first half of next year.

“It’s facing reality and addressing the issues that are bound to surface,” said Credo Real Estate managing director Karamjit Singh.

“It’s the right thing to do, demand for investments like this has waned because of uncertainties in the market.”

Sites on the reserve list are triggered for tender only when a buyer applies to submit a minimum bid that is deemed acceptable to the Government. Sites on the confirmed list are sold at set times, without need for any trigger.

Analysts said that the latest move was expected, even as the industrial property sector has weathered the current economic and financial unrest better than its residential and commercial cousins.

“The industrial sector, especially in the high-tech industrial space, has been least affected by the turmoil,” Cushman and Wakefield managingĀ  director Donald Han. But it’s still tied to economic growth, “and companies are feeling the stress”.

While certain business parks have seen some interest in recent months asĀ  companies moved parts of their operations from the central business district to cheaper locations, there is a limit to this buffer.

“Developers usually take 14 to 18 months to construct an industrial building, and though it is quite a long period, they’re unwilling to take up the sites because of difficulties in pricing,” said Mr Han.

Although the softening demand for industrial land is expected to continue, MTI is adding two new sites at Kaki Bukit Road 2 and Woodlands Industrial Park E5 to the six on the reserve list, including Tampines Industrial site. The eight sites, with a total site area of 15 hectares, will be carried forward to the first half of next year.

In October, two sites from the reserve list, one in Kallang Pudding and another in Ubi Avenue 4, were sold. But the low price the Kallang site fetched indicates the weakening demand for industrial space, said analysts.

When asked if these reserve sites are likely to be triggered for tender, Mr Han added that a clearer picture is likely to emerge in the second half of next year.

“Now, it’s not about whether the site is attractive or not. Construction costs are still high and bank finance is still tight. The development of these sites will play second fiddle on companies’ to-do lists,” he said.

Source : Today – 11 Dec 2008

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