Challenging 2016 for Industrial Property as Land Supply Cut by Government
Adapted from the Straits Times Report dated 29 Dec 2015: As a result of a market glut, the government is cutting down the supply of industrial land in the first half of 2016.
Six sites with an area of 4.04 has are confirmed to be cut. These sites are on 20-year leases and most are less than a hectare in size. In any case, if these are strata-titled, getting a mortgage would be difficult. It is noted that a shorter loan tenure could mean a larger monthly mortgage repayment and would likely be put off for smaller companies.
Experts reckon that the government is certainly watching this sector and this decision is based on the fact that there is a large number of existing and upcoming supply.
Three of the four reserve list sites (from the second half of 2015) are on 30-year leases. These are larger sites, and so, more suited for strata sales.
Another trend merges that non-developers are starting to purchase bigger plots. For instance, Trans Eurokars bought a 1.63ha site with a plot ratio of 2.5.
As at September 2015, there were around 2,300 industrial units totalling 657,000 sq m in uncompleted strata-titled developments still available for sale, with about 56 per cent of them zoned for B1 use.
According to JTC report; As at end of 3Q 2015, there were around 2,300 units, totalling 657,000 sqm, in uncompleted strata-titled developments still available for sale. The majority of unsold units were located in the North region of Singapore, and slightly more than half were B1 spaces. About 1,000 units of such industrial units are expected to complete by 2016, and could provide options for industrialists looking to own their production space.
Overall, the prices of industrial properties fell 0.9 per cent year-on-year in the second quarter of 2015. The prices of multiple-user factory space saw a 2.3 per cent decrease in the same period, while single-user factory space prices remained flat. On a quarter-on-quarter basis, overall prices fell 0.7 per cent.
With the softening of prices and rentals, transaction volume also decreased by around 20 per cent year-on-year in the second quarter.
Going forward, market conditions in the industrial property market are expected to remain challenging in 4Q 2015 and 2016. Most industrialists are expected to stay cost conscious and cautious with regards to their business and real estate needs. This might also lengthen the decision-making process
The average prices of prime freehold conventional industrial properties are projected to hold steady as most owners are not likely to relent on their asking prices and may prefer to lease out their properties instead.