Capital values for industrial properties up by 5% q-o-q

For 60-year leasehold strata- titled factory space, capital value increased by about 5% q-o-q to $289 psf for ground floor units and $213 psf for upper floor units.

Director of Industrial and Logistics Services, Bernard Goh said, “it was observed that capital values for industrial properties were growing at a faster pace than rental values. This could be because some investors who were priced out of the residential sector invested in industrial properties instead. The three rounds of measures imposed on the residential market since October 2009 could have also turned some residential investors to the industrial market which do not have such stringent restrictions. This in turn helped boost demand for strata-titled industrial units.”

In a statement, CBRE said that from January to March 2011, the capital values for 60-year leasehold strata- titled factory space increased by about 5% q-o-q to $289 psf for ground floor units and $213 psf for upper floor units. Similarly, capital values for freehold strata-titled warehouse space also increased by about 5% q-on-q to $449 psf and $392 psf for ground and upper floor units respectively.

The first quarter of 2011 started on a healthy note with manufacturing output growing by 10.5 per cent y-o-y in January and NODX increasing by 21.0 per cent y-o-y and 7.8% y-o-y in January and February respectively. Three industrial sites were awarded under the GLS programme during the quarter. Rents and capital values increased over the previous quarter.

The two largest transactions for industrial properties were made by REIT companies. AIMS AMP REIT paid $72.00mn ($147 psf based on GFA) for NorthTech while CIT bought 4 & 6 Clementi Loop for $63.30mn ($175 psf based on extended GFA). As part of the sales agreement, the seller had to expand the existing building at 4 & 6 C lementi Loop from 17,648 sm (189,963 sf) to 33,521 sm (360,825 sf).

Cache REIT made its maiden purchase in March, snapping up 6 Changi North Way for $30.90mn ($175 psf based on GFA) and 4 Penjuru Lane for $8.90 million ($162 psf based on GFA).

CBRE added, besides the REITs, other investors were also active in the investment market. The Crescendas Group bought UE Print Media Hub for $51mn ($155 psf based on GFA) and Swiber Corporate Services Pte Ltd became the new owners of 12 International Business Park for $37mn ($317 psf based on GFA).

During the quarter, two 30-year leasehold industrial sites were awarded. The site along old Toh Tuck Road/Toh Tuck Avenue was awarded to Incorporated Builders Pte Ltd for $8.70 million ($50 psf/plot ratio). Soon Hock Realty Pte Ltd paid $41.40 million ($157 psf/plot ratio) for the site along Kaki Bukit Road 4. In March, a 60- year leasehold site along Ubi Road 1/Avenue 4 was awarded to Oxley Ascend Realty Pte Ltd who placed the winning bid of $72.20 million ($217 psf/plot ratio). Together the three sites can yield a maximum GFA of 71,593 sm (770,631 sf).

Mr Goh added “The outlook for the industrial property sector is still optimistic with demand for industrial space remaining healthy. As such, rents are expected to continue to climb upwards gradually.”