Industrial property prices to continue to climb in 2013, say analysts

Prices of industrial properties in Singapore have risen by some 27 per cent in the first three quarters of 2012.

Some analysts say prices could climb by 30 per cent for the entire year, one of the highest in recent years. They attribute the increase to buoyant demand for strata-titled industrial premises.

Low interest rates, high liquidity and cooling measures in the residential property segment have further fuelled demand.

The Singapore government has set aside 24.84 hectares of industrial land for the first half of 2013. They will also require developers to build a minimum number of large factory units for selected plots under the Industrial Government Land Sales Programme.

Some market watchers however say the upward price trend is likely to continue in 2013.

“Prices are at an all-time high now. Compared to the 1997 peak, we are about 14.9 per cent higher, and compared to the most recent peak in 2008, we are now at more than 59.3 per cent higher,” said Chia Siew Chuin, director of research and advisory at Colliers International.

“At the same time, buyers are also more resistant now in terms of pricing especially within such uncertain economic conditions,” added Ms Chia.

The government cut lease terms for industrial sites from 60 to 30 years earlier this year in a bid to make industrial land more affordable.

However some analysts say the move has had a limited impact.

“We can expect more policy measures affecting the industrial market next year. If that transpires, we will see a flattening out in terms of industrial land price demand… (However) we will still be looking at an uptick (of) not more than 10 per cent,” said Donald Han, a special advisor at HSR.

Analysts also expect rentals for industrial properties to fall in the coming year, in view of some 8 million square feet of business and industrial parks that is due to be completed in the next 16 months.

“The substantial supply that is coming in both high tech space as well as conventional industrial spaces will likely help keep rental growth in check going forward,” said Chua Yang Liang, head of research at Jones Lang LaSalle.

“Capital value is a very different ball game now; it may see some stronger growth compared to rental,” added Mr Chua.

Market watchers have also said that they expect rentals in the office property segment to dip by 5 per cent in 2013.

Analysts however say the decline will be mitigated by rising demand for office space in the central business district, especially from companies outside the financial services sector. These include law firms as well as a variety of consultancy firms.

However, with the uncertain economic outlook next year, analysts say a supply overhang could be a rising concern.

They expect some 4 million square feet of new office space to be available in the next two years.

Source : Channel NewsAsia – 26 Dec 2012

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