Industrial landlords brace for grim times ahead

Tenants are getting tougher and tougher.

Tenants call the shots in the industrial property market, and landlords are bracing for even tougher times ahead as the JTC's anchor tenancy rule gain steam.

A report by Jefferies Singapore noted that while the industrial price index has barely changed from the first quarter of 2014 to the first quarter of 2015, this goes against the fact that frictional vacancy has increased, downtimes are longer and rents are declining.

"The discrepancy is mainly because of different price expectations from buyers and sellers. Anecdotally, sellers are asking S$300 psf for 20- year lease land. Participants believed that sellers will become more realistic by 2017 as JTC's
deadline on compliance of anchor tenancy rule approaches," wrote Krishna Guha, analyst at Jefferies.

"At the margin, demand for JTC land has reduced and owners are willing to sell on vacant lease possession as tenants are not willing to commit to long leases. Implementation of 3% stamp duty will result in lowering acquisition price, basically seller will end up paying the duty," he added.