Property boom: S$1.1b worth of industrial properties transacted in Q211

This takes the total transaction value in 1H/2011 to S$2.3b, reflecting a year-on-year growth of 14%.

Buying activity remained strong, particularly for strata industrial units. Industrial properties have become an alternative investment choice amid spiking prices in the residential sector, coupled with rounds of cooling measures targeted at the segment, according to Savills’ latest Industrial Briefings Q2/2011. Around S$1.1 billion worth of property changed hands in Q2/2011, 42% more than the corresponding period last year. This takes the total transaction value in 1H/2011 to S$2.3 billion, reflecting a year-on-year growth of 14%.

The recent trend of developers rolling out smallish units has also boosted affordability. For example, unit sizes at Oxley Bizhub by Oxley Group and UB.1 by Sim Lian Group can be as small as around 900 sq ft. Brisk sales during the preview launch of North Spring Bizhub by Soil Build Group were credited to an affordable lump-sum quantum, with prices starting from S$478,000 for a 1,539 sq ft unit.

Industrial REITs continued on their acquisition trail in 1H/2011, although the majority of transactions were inked in Q1. Six properties with a total sales value of S$301.9 million were acquired in Q1. Ascendas REIT’s S$125.6 million purchase of Neuros and Immunos in Biopolis topped all transactions in terms of quantum value. Also of interest are Cache Logistic’s Trust’s S$39.8 million purchases of 4 Penjuru Lane and 6 Changi North Way, which are its maiden acquisitions since its listing in April 2010.

The second quarter saw a slowdown in investment activities across all property sectors on the back of rising uncertainties and a volatile stock market. Only two industrial properties were acquired by REITs in this period; Ascendas REIT once again made a big-ticket S$121.6 million purchase of Nordic European Centre, while Cambridge Industrial Trust acquired 5 and 7 Gul Street 1 for S$14.5 million.

This year’s land tenders saw keen competition among developers due to their good locations in mature industrial estates, as well as proximity to existing or upcoming MRT stations. In Q1, a 30-year leasehold site at Kaki Bukit Road 4 drew a whopping 18 bids with a top offer of S$157 per sq ft per plot ratio (psf ppr). Another site at Ang Mo Kio Street 62 received 13 bids with a highest offer of S$170 psf ppr, beating market expectations of S$120 to S$130 psf ppr. The 60-year leasehold parcel is located near Yio Chu Kang MRT station and was the first site made available in Ang Mo Kio in a long time.

Despite a general market slowdown in Q2, a “Business 1 – White” site at Irving Place near Tai Seng MRT station attracted 15 bids in June. The top bid of S$343 psf ppr was also much higher than the market expectation of S$200 to S$270 psf ppr. Other than the location attributes, the high number of bidders reflects developers’ confidence in the industrial market, both in terms of leasing and strata-sales potential. The top bidder, Oxley Holdings, plans to build an upscale industrial project, similar to its nearby Oxley Bizhub, comprising strata industrial and commercial units.

Supply, demand and vacancy
Around 2.1 million sq ft of factory space was completed in Q2. The majority of space was single-user factories, including Rolls-Royce facilities and JTC’s Business Aviation Complex, both at Seletar Aerospace Park (SAP). The latter was developed to provide warehouse space for aviation businesses and start-up space for new entrants to SAP. The quarter also saw the completion of the 352,000 sq ft Woodlands Bizhub, which we understand has been fully sold. The island- wide vacancy rate rose slightly from 6.9% at the end of Q1 to 7.1% at the end of Q2.

The warehouse segment also saw around 2.1 million sq ft of space entering the market in Q2. A notable completion is the 806,000 sq ft CWT Logistics Hub 3 at Tanjong Penjuru. Its proximity to Jurong Island, as well as Pasir Panjang Terminal, Brani Terminal and Jurong Port, makes the project an ideal logistics facility. The island-wide vacancy rate was up slightly from 7.2% at the end of Q1 to 7.7% at the end of Q2.