What you need to know about the new conditions for industrial developments

If you think it’s just about lowering prices and rents, think again.

R’ST Research director Ong Kah Seng shared with Singapore Business Review some rationale and implications of the new conditions set for industrial developments from selected sites awarded under the Government Land Sales (GLS) Programme in H1 2012. They are as follows:

• The rationale for the new measures was to have tighter control about the permissible uses of industrial properties, particularly as the recent year has seen a spike in buying interest and prices of strata industrial properties, which translates to increasing occupancy costs for users of industrial space.

• Although the new regulation will tighten the new supply for strata industrial space and thereby slightly increase the buying interest for existing strata industrial properties, it will serve to ensure that new industrial properties are used according to the designated purposes, minimizing long term price and rental increase should there be new users who do not qualify and can actually afford better than needy industrial space users. It is certainly easier and more efficient to monitor designated industrial property uses for single owner industrial developments than strata industrial properties, where ownership, purchasing power and usage is fragmented, and differentiated, across individual strata owners.

• The buying interest for industrial sites through the GLS is expected to be more cautious, as some developers will not be able to offload their investments quickly through strata industrial unit sales. Nevertheless, buying interest will continue to be overall positive for well positioned and strategic industrial locations and some seasoned industrial developers may continually be keen in buying land at more realistic prices amid the economic slowdown, especially those who have profited from sale of previous strata industrial projects.

• Developers who wish to strata divide the industrial project may be more keen to consider en bloc purchase of older private industrial developments or private sale of sites (subject to permission for strata division). This potential availability of new strata industrial projects from redeveloped industrial buildings or private land, together with the availability of single-owner industrial projects from the new GLS sites that will be awarded, will lead to a moderated and more balanced supply of industrial property (types) catering to the needs of different users and investors.

The Ministry of Trade and Industry (MTI) said it will place 16 sites in the Confirmed List and 12 sites in the Reserve List, with a total site area of almost 24 hectares.

Of note, MTI will introduce new conditions for industrial developments with effect from January 1, 2012 to better meet the needs for ready-built industrial space.

Developers are not allowed to strata subdivide the development on selected sites in the first 10 years after the completion of the project.

If the developer decides to strata subdivide the development upon expiry of the 10-year period, the gross floor area (GFA) comprised in a single strata unit should not be less than 150 square metres.

To contact the journalist, you may send your message to krisana@charltonmediamail.com

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