Industrial property prices and rent little changed in Quarter 3

133
image credit: Google Map

Industrial property prices remained relatively stable in the third quarter of this year said JTC’s Quarterly Market Report. The report showed that industrial property prices increased by 0.1 per cent from the previous quarter, while industrial rents slipped 0.1 per cent.

Compared to a year ago, industrial property prices softened 1.1 per cent, while rents dipped 0.4 per cent.

Commenting on JTC’s Q3 2018 Report, Tay Huey Ying, Head of  JLL’s Research and Consultancy for Singapore said industrial property prices remained on a path to recovery in spite of escalating trade wars. She added that the industrial property market here continues to display signs of bottoming.

“The all-industrial property price index (which tracks price movements of single-user and multi-user factories) turned positive for the first time in 14 quarters after staying flat in 2Q18. Rent-wise, the all-industrial property rental index recorded a fourth straight quarter of modest 0.1% q-o-q contraction. Encouragingly, rents of warehouses held steady for the first time after 13 consecutive quarters of decline.

The islandwide occupancy rate also reached a six-quarter high of 89.1% in 3Q18, following a reduction in net new supply and higher net absorption.

The mending business sentiment amid the protracted strong manufacturing sector and trade performance of the past several quarters, coupled with slowing supply growth, has helped to stabilise Singapore’s industrial property market.

While today’s report card for the industrial property market is generally within expectations, it was surprising that JTC’s rental index for business park space reflected a slight 0.1% q-o-q fall in 3Q18 that ended five consecutive quarters of growth. JLL’s research showed that, underpinned by steady demand and sustained growth in office rents, the average monthly gross rents of business park space strengthened for the fourth consecutive quarter to reach SGD 3.84 per sq ft per month as of 3Q18, after firming by 0.5% q-o-q.”

JLL predicted that the industrial property prices will see a turnaround by end-2019.

“Barring a worsening of the external environment or other unforeseen external shocks, we are hopeful that all industrial property indicators (rents and prices) may turnaround by end-2019 as the low pipeline supply in 2018 and 2019 will allow demand to play catch up with supply.

According to JTC’s 3Q18 data, another 0.5 million sqm gross floor area of new industrial space is expected to be ready in 4Q18. Including the net addition of 0.4 million sqm net floor area in the first three quarters of 2018, this works out to around 0.9 million sqm of estimated net floor area in 2018 (assuming 80% to 90% efficiency for the 4Q18 supply pipeline), significantly lower than 2017’s net new supply of 1.9 million sqm. 2019’s pipeline supply of around 1.3 million sqm gross floor area or about 1.0 to 1.2 million sqm of estimated net floor area (assuming 80% to 90% efficiency) is also lower than the average annual net new supply of 1.4 million sqm net floor area for the 10 years from 2008 to 2017.”

Commenting on the industrial property price performance, Desmond Sim, CBRE’s Head of Research for Singapore & Southeast Asia said:

“Based on JTC’s Q3 2018 statistics, overall industrial occupancy rate increased by 0.4% q-o-q to 90.0%. Improvement in occupancies were mainly from the single-user factory, business parks and warehouses. In Q3 2018, there was an uptick in leasing volume for both islandwide factories and warehouses on a y-o-y basis. Factories leasing volume increased by 7.1% y-o-y to $10.851 mil. There was a noticeable increase in demand for storage space in recent quarters, driven by a build-up of inventory from the growing gap between higher output and lower exports. JTC statistics showed that warehouse leasing volume saw growth of 82.3% y-o-y to $5.553 mil. This contributed to the stronger net absorption for warehouse space in Q3 2018 at 1.81 mil sq. ft., which shored up occupancy by 0.9 percentage points to 89.4%.

The strong occupier performance was not uniform across all buildings, with new buildings of higher specifications outperforming the older facilities. Some tenants had taken advantage of the lower rents to move operations into these new facilities. With the improved occupancy, some landlords are maintaining rents. Overall industrial rents eased at the same pace as the previous quarter, at -0.1% q-o-q. After 13 consecutive quarters of decline, warehouse rents held steady for the first time in Q3 2018.

This could possibly be the calm before the storm arising from the China-US trade war. Singapore may be affected by this bilateral trade war as there are Singapore exports that head to China for reassembly which may eventually head to the US. Nonetheless, positivity around South East Asia trade remains as Singapore is a key logistics hub in the SEA region.”

How to Secure a Commercial Loan Quickly

If you need a commercial loan to cash-in on the predicted turnaround of industrial property prices, but are unsure if you qualify for one? iCompareLoan mortgage brokers can set you up on a path that can get you a commercial loan in a quick and seamless manner.

Alternatively you can read more about the Commercial Loans in Singapore before deciding.  Our brokers have close links with the best lenders in town and can help you compare Singapore commercial loans and settle for a package that best suits your purchase or investment needs.

Whether you are looking for a new commercial loan or refinance, our brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the loan. And the good thing is that all their services are free of charge. So it’s all worth it to secure a loan through them.

For advice on a new commercial loan  or Personal Finance advice.

To speak to our Panel of Property agents.