Published November 4, 2010
By EMILYN YAP
(SINGAPORE) Industrial properties are attracting their fair share of buyers even as glitzy condominiums and gilded bungalows hog the limelight.
According to Cushman & Wakefield, $3.42 billion worth of factory units changed hands in the first three quarters of the year. This already exceeds the $1.83 billion for the whole of 2009 by 87 per cent.
The transaction value so far this year is just $290 million shy of the record high in 2008, when $3.71 billion worth of factory units were sold.
Warehouses have also been sought after. Transactions in the first three quarters came up to $83.3 million - almost triple last year's $28 million.
Growing demand for industrial space has led to rising rents. In a report yesterday, Colliers International said the average prime warehouse rent in Singapore was $1.56 per square foot per month in the first half of the year, up 3.3 per cent from $1.51 psf in the second half of 2009.
As a result, Singapore became the seventh most expensive market in the world to rent a prime warehouse - climbing two notches from ninth place six months ago.
Tokyo, London's Heathrow and Hong Kong took the top three spots in the latest ranking.
Apart from end-users, investors have also taken a fancy to industrial assets - a factory unit requires a smaller capital outlay and generates a higher yield compared with a private home, Mr Ong said.
For instance, the net yield of a factory unit would be at least 6 per cent while that of a private home would be about 3 per cent, he said.
Institutional funds are among some investors in the industrial property market, said Colliers International industrial director Tan Boon Leong.
He suggested that with the government introducing cooling-off measures for the residential sector, some investors may also divert their funds to the commercial or industrial sectors.
Interest in the industrial property sector has not been restricted to completed factory or warehouse units; there has also been intense bidding for land.
Just yesterday, the Urban Redevelopment Authority (URA) put a 30-year leasehold industrial site at Pioneer Road North/Soon Lee Street up for bidding. A developer triggered the sale of the reserve list site by committing to pay at least $13.8 million for it.
While prospects for the industrial property sector have certainly improved since the global financial crisis, they are not all bright and cheery.
Some consultants expect to see little or no rental growth in the next few quarters, given renewed fears of a slowdown in the manufacturing sector.
'Industrial rents are expected to stay relatively flat till the end of 2010,' said Colliers research and advisory director Tay Huey Ying. She cited the Economic Development Board's survey of the manufacturing sector, showing that business sentiment for October to next March has moderated.
The amount of rent that industrial properties can fetch will be crucial to investors, since returns are more likely to come from rents than from capital appreciation, said SLP International Property Consultants research executive director Nicholas Mak.
'They should not be buying industrial property with the same kind of investment strategy as buying residential property,' he said.
Investors should also recognise that the industrial property market is less liquid than the residential one when it comes to leasing or selling units, he added.
Source: http://www.businesstimes.com.sg
