Lull’s over: Industrial property rentals on a tear in 2Q 2011

Prime factory and warehouse spaces see fastest quarterly growth of 6-7% in average monthly gross rents in 3 years.

According to a release by Colliers International, after a temporary lull in 1Q 2011 due to the Lunar New Year’s festive season, Singapore’s industrial property market showed encouraging signs of picking up in 2Q 2011 – with both the leasing and sale markets experiencing a flurry of activities.

Leasing market

The latest quarterly industrial property market research conducted by Colliers International revealed that the average monthly gross rents for prime factory and warehouse spaces surged by 6-7 per cent quarter-on-quarter (QoQ) in 2Q 2011, the fastest quarterly growth in three years.

By 2Q 2011, prime ground floor factory space was commanding average monthly gross rents of S$2.25 per sq ft. This is some 8.9 per cent below the peak in 3Q 2008, during which rents reached S$2.47 per sq ft.

Similarly, prime ground floor warehouse space commanded average monthly gross rents of S$2.34 per sq ft, which is 4.5 per cent below its 4Q 2008 peak of S$2.45 per sq ft.

Meanwhile, the average monthly gross rents of prime upper factory and warehouse spaces in 2Q 2011 were S$1.96 per sq ft and S$1.90 per sq ft, respectively – exceeding 2008’s 4Q peak of S$1.81 per sq ft and S$1.76 per sq ft correspondingly by 8.3 per cent and 8 per cent.

On the back of a moderation in the pace of office rental growth, as well as a healthy pipeline of new high-specs space, rents for high-specs space continued to climb during the quarter, albeit at a moderated pace of 2.4 per cent QoQ in 2Q 2011, compared to 4.4 per cent QoQ in 1Q 2011.

Consequently, average monthly gross rents for high-specs space stood at S$3.41 per sq ft in 2Q 2011, which is some 18.4 per cent below the S$4.18 per sq ft achieved at the peak in 1Q 2008.

Sales market

The sales market was particularly robust in 2Q 2011, as investors and occupiers were treated to a strong line-up of project launches – including the 454-unit North Spring Bizhub in Yishun, the 8-unit Oxley Bixhub in Ubi and the 115-unit One Pemimpin at Pemimpin Drive, among others.

Mr Tan comments, “Each of these strata industrial project launches in 2Q 2011 has its unique appeal. For instance, North Spring Bizhub is by far the second ramp-up industrial development catering to 40- foot containers that is available for strata sale. Oxley Bizhub comprises recreational facilities which are not commonly found in industrial properties, while One Pemimpin holds a 999-year leasehold tenure, as opposed to most industrial projects that have a much shorter tenure of either 30 or 60 years.”

The sales market was also given an additional boost by the rising rental levels, which resulted in a
growing willingness of occupiers to secure their own premises. Hence, although the launch prices at some of the new industrial projects were noticeably higher than those achieved for existing neighbouring developments with similar tenures, sales were brisk.

Average capital values for prime freehold factories on the ground floor climbed 3.2 per cent QoQ, from S$556 per sq ft in 1Q 2011 to S$574 per sq ft in 2Q 2011, while those on the upper floors rose 5.3 per cent QoQ, from S$475 per sq ft in 1Q 2011 to S$500 per sq ft in 2Q 2011.

Similarly, the average capital values for prime freehold warehouses on the ground floor and upper floors rose by 7.3 per cent and 7.8 per cent QoQ, to end the quarter at S$571 per sq ft and S$482 per sq ft, respectively.