Industrial rents shore up in fourth quarter

The implementation of measures to curb speculation in the residential property market ushered more investors to turn to the industrial market.

Islandwide private conventional industrial rents rose marginally in Q4 2010 after remaining unchanged in the previous quarter, according to DTZ Research.Average monthly gross rents for first-storey private industrial space increased 2.5% quarter–on-quarter (QOQ) and 5.1% year-on-year (YOY) to $2.05 per sq ft. Rents for upper-storey space grew 3.1% QOQ and 6.5% YOY to $1.65 per sq ft per month. Average monthly gross rents of first-storey and upper-storey private industrial space bottomed in Q4 2009 at $1.95 and $1.55 per sq ft per month respectively.Average rents for hi-tech industrial properties, which include the business parks and science parks, saw an increase of 1.6% QOQ and 3.2% YOY to $3.20 per sq ft per month in Q4 2010. Rents for hi-tech industrial properties are still about 28.9% below the peak in Q3 2008.With the increase in average office rents, the rental gap between decentralised offices and hi-tech industrial space has widened. Average office rents at Tampines Regional Centre are about 26.6% above average hi-tech rents. This is an increase from a rental gap of 20.6% seen in the last quarter but still far below the 74.6% difference seen in 2008. Consequently, DTZ Research see less substitution of high-tech industrial space for office space as compared to 2008.Ms Angela Tan, DTZ’s Executive Director (Occupational and Development Markets) commented: “There is strong demand from end-users for standalone factories and SMEs for multi-user factory space. As the industrial market generally moves in tandem with the economy and the office market, industrial rents are expected to continue to rise next year but at a more moderate pace. ”Capital values for industrial properties grew at a faster rate as compared to the previous quarter, fuelled not just by end-users but also investors. Average capital values for first-storey industrial space grew 2.3% to $525 per sq ft in Q4 2010 while average capital values for upper-storey industrial space rose 4.2% QOQ to $370 per sq ft, more than the 1.4% growth last quarter. Average capital values for first-storey and upper-storey industrial space grew 6.1% and 13.8% YOY respectively.“The implementation of measures to curb speculation in the residential property market and the lower quantum of industrial properties have led more investors to turn to the industrial market,” noted Ms Chua Chor Hoon, Head of DTZ South East Asia Research.