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Industrial market gets the jitters from these threats

Only 387,500 sq ft of factory space were added.

According to Colliers International Asia Pacific Industrial Market Overview, amid the global economic uncertainties and slowdown in global trade, Singapore’s GDP growth slowed further to 1.4% YoY over the six months to September 2012 compared to the 2.6% YoY growth recorded in the preceding six-month period ending March 2012.

Here's more from Colliers International:

Similarly, the growth in manufacturing output moderated to 1.8% YoY in the current review period, from the 4.0% YoY growth recorded for the period from October 2011 to March 2012.

In light of the above, industrialists were cautious about their business expansion plans. Firms were also reluctant to relocate due to the high relocation costs. Hence, activity in the leasing market was led by renewals and to a lesser extent by firms expanding or relocating their premises.

Nonetheless, healthy leasing activity supported rental growth during the six months between April and September 2012.

The average monthly gross rents for factory space in the central area and for warehouse space in the eastern part of Singapore, inched up by 1.3% and 0.5% during this period to S$1.54 per sq ft and S$1.45 per sq ft, respectively, as of the end of September 2012.

Similar to the preceding six months ending March 2012, institutional investors, particularly REITs, and industrialists seeking their own landed premises, continued to support industrial investment and land sales activities between April and September 2012.

This provided the impetus for further growth in capital values by 5.2% to 6.1% during the six months to the end of September 2012, which is comparable to the increase in the previous six-month period.

Industrial land values, on the other hand, stayed stable, amid increasing buyer’s price resistance in the wake of the global economic uncertainties.

Notable industrial buildings acquired by REITs during this period include Cambridge Industrial Trust’s purchase of two factories located on 30 Marsiling Industrial Estate Road, 8 and 11 Woodlands Walk for S$39.0 million and S$17.3 million respectively, and the Alfa Romeo Building (a two-storey showroom) on 30 Teban Gardens Crescent for S$41.0 million.

Over the same period, Cache Logistics Trust bought the Pandan Logistics Hub, a warehouse on 49 Pandan Road, for S$66.0 million, while Ascendas REIT divested Block 5006 Techplace II on Ang Mo Kio Avenue 5 to Venture Corporation Limited for S$38.0 million.

According to official figures from the Urban Redevelopment Authority (URA), the April to September 2012 period saw the net addition of only about 387,500 sq ft of single-user factory space.

This is significantly 82.5% lower than the 2.22 million sq ft of similar space completed in the preceding six-month period. Examples of major single-user factory completions during the current review period include Halliburton Completion Tools Manufacturing’s 488,681-sq ft factory at 11 Tuas South Avenue 12; Bell Helicopter Asia’s 158,229-sq ft premises at 6 Seletar Aerospace Heights; FMC Technologies Singapore’s 120,556-sq ft factory at 13 Benoi Sector; and Cambridge Industrial Property Management’s 115,174-sq ft facility at 43 Tuas View Circuit.

Over the next 12 months to the end of September 2013, the performance of Singapore’s industrial property market will hinge on external factors such as the Eurozone debt crisis and the performance of major economies like the US and China.

These factors will have a bearing on consumer demand which will in turn affect the demand for Singapore’s manufacturing exports as well as manufacturers’ logistics and storage needs.

Notwithstanding this, the industrial property market could potentially benefit from foreign firms relocating or setting up their operations in Singapore.

Some of these firms may have turned their attention to Asia due to the unfavourable economic climate and growth prospects back home and are using Singapore as a springboard into the region.

Hence, industrial land values are forecast to stay relatively stable over the next 12 months while capital values and rents could register some upswing of up to 5% over the corresponding period.

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