Industrial rents seen to stabilize in 2013 despite aggressive landlord pricing

Kept in check by cost-conscious tenants.

“Going forward, industrial rents are projected to stay relatively stable for the rest of 2013. Although landlords of newer and upgraded buildings could seek higher rents, any increase in rents will still be limited by tenants’ cost-conscious stance and supply pressures," said Ms Chia Siew Chuin, Director of Research & Advisory at Colliers International in the property research firm's latest outlook for industrial rents.

Consequently, for the rest of 2013, industrial rents are forecast to remain flat for prime conventional industrial premises, with marginal upside seen for high-specs and business park space.”

Colliers noted that the The Government’s industrial land sales programme for 2H 2013, which continues to release for sale industrial sites with a maximum tenure of 30 years, could provide some level of support to demand for freehold or leasehold properties with longer-than-30-year land tenure.

Ms Chia comments, “The average capital values of prime freehold warehouse and factory space are forecast to increase at a moderate pace of about 0.5 per cent per quarter. This will bring the full year price forecast to up to 3 per cent – significantly slower than the growth range of 10-22 per cent in 2012 for these two types of conventional industrial space.”

Meanwhile, transaction activity in the strata-titled industrial property market in 2H 2013 is likely to stay subdued – due to the effects of the SSD, the fragile economic outlook, as well as the potential interest rate increase as a result of the cut-back in monetary stimulus by the US Federal Reserve.

Colliers also said end users and investors with a longer investment horizon are likely to remain as the two main groups of buyers for such properties; nonetheless, they are expected to be price sensitive and exercise greater prudence when evaluating their purchase decisions.