Wealthy manufacturers on the lookout for bargains as industrial property values drop

Tenant demand is at a record low.

Deep-pocketed industrialists are keeping an eye out for relatively inexpensive factory and warehouse space, as values of industrial properties continue to drop.

According to Knight Frank, the industrial sector entered 2016 with a hint of optimism despite softer market conditions, with buyers observed to start sourcing and securing good property deals in view of falling prices.

Island-wide average price for upper-floor strata-titled factory units fell by 1.0% quarter-on-quarter to $422 per square feet in Q1. This is largely attributed to the decline in average price of resale factory units with lease tenures of 30 years or less, which dropped by 13.9% quarter-on-quarter to $225 psf in the quarter.

Overall demand for upper-floor strata-titled factory units weakened by 13.6% q-o-q and 41.9% y-o-y to 108 caveats in Q1 2016, the weakest in ten years. While resale transactions held fairly steady at 103 caveats, only five new sale caveats were recorded in Q1 2016. 

“Taking advantage of the limited sizeable industrial land sale sites announced by the government for H1 2016, developers could see it as opportune time to clear their unsold strata-titled industrial inventory as future supply of strata-titled industrial spaces could taper over time,” Knight Frank said.