Reduced IGLS tenures could scare off industrialists: Colliers

Industrialists are afraid the now shorter-leased sites will have diminished long-term values and require a tougher loans process.

It also doesn't help that the smaller land parcels available under the 2H12 Industrial Government Land Sales (IGLS) programme are mostly located in Tuas South, which Colliers deems a far-off "hockey stick" location for development.

The comment came as the government unveiled its plan to halve the IGLS tenures to 30 years from 60 years starting the 2H12 programme, and retroactively to unsold 1H12 sites.

Here's more from Colliers:

The government has given a clear indication on its intention to increase the flexibility for land development and to make industrial properties more affordable for industrialists by reducing the land size and lease tenure of the sites on offer under the 2H 2012 Industrial Government Land Sales (IGLS) Programme.

In the Confirmed List, the majority or 10 out of the 16 sites are located in the Tuas South area. These small sites with short tenures of 22 years are mainly targeted at industrialists looking to build their own customised facilities. The Confirmed List sites situated at Sunview Road, Serangoon North Avenue 5, Woodlands Avenue 10, Buroh Street and Ubi Avenue 4 have comparatively better locational attributes. These, which are likely to be out of the league for industrialists, are targeted at developers. Similarly, the sites in the Reserve List are evidently targeted at developers given the size of the plots.

Depending on the attractiveness of the sites, shorter tenures capped at 30 years may or may not temper developers’ interest and in turn land bids and eventual pricing. Also, the reduced tenures may be too short for industrialists especially those with a longer-term business horizon and for those who find the property to have diminishing asset value in the longer term. Most owners including end-users would also be concerned about the resale value of the property if the tenure runs too short. It would also be difficult to secure loans for properties with shorter tenures, thereby limiting the chance for end-users to build their own premises at a reasonable cost.

Hence, it remains to be seen whether the government’s strategy will bring end-users into play, particularly given that the smaller land parcels are located at the far-off “hockey stick” location of Tuas South.