Industrial spaces hit by O&M players ditching Singapore for Malaysia

More vacant spaces ranging 1,500 sqft and below set to rise.

The industrial sector continued to face strong headwinds in most industries and sectors, putting further pressure on both industrial space rentals and prices in Q3 2016.

Knight Frank (KF) forecasts that average island-wide rents could decline by -6.0% to -8.0% year-on-year (y-o-y) in Q4 2016 and adding up to more hassle is an expected next wave of consolidation among smaller businesses in the Pioneer-Tuas industrial cluster.

According to KF, relocation of larger oil and gas services companies will impact smaller supporting companies in the Pioneer-Tuas industrial cluster •

"Smaller companies offering supporting services in the oil and gas industry and ecosystem are expected to face stronger headwinds in the coming two to three quarters, as oil prices continue to fall and with large foreign oil and gas services companies McDermott and Subsea 7 relocating most of their operations out of Singapore to Kuala Lumpur, Malaysia," said KF in a report.

The companies had made the decisions earlier this year, with McDermott citing proximity to regional clients as the motivation for the move, while Subsea 7 is purported to have decided so for cost reasons.

KF believes that consolidation of small businesses will lead to further weakness in the demand for space in the Pioneer-Tuas industrial cluster. In particular, vacancy of spaces of 1,500 sq ft or less, which meet the needs of such smaller businesses, is expected to rise.