Industrial space rent generally fell in 2015

Singapore saw the average monthly gross rents of first-storey and upper-storey factory space drop 2.3 percent and 2.9 percent quarter-on-quarter to S$2.10 per sq ft and S$1.65 per sq ft in Q4 2015, revealed a DTZ report.

This came as landlords felt the impact from the contraction in net demand for multiple-user factory space.

DTZ noted that the decline in Q4 resulted in a 4.5 percent and 5.7 percent drop in monthly rents of first-storey and upper-storey factory respectively for the whole of 2015.

JTC statistics showed that net demand for multiple-user factories fell to 872,000 sq ft in Q3 2015 from 1.1 million sq ft in Q2 2015. According to DTZ, the fall in demand for factory space was primarily due to the weaker manufacturing sector arising from falling orders from overseas and domestic markets. The manufacturing economy contracted for six consecutive months since June 2015, based on the latest Purchasing Managers Index in January 2016.

DTZ partially attributed the drop in rents of multiple-user industrial space to excess supply in the market.

With 4.6 million sq ft of multiple-user factory space coming into the market in 2016 amid a weaker economic environment, it is anticipated that industrial rents will trend downwards this year, it said.

Meanwhile, business parks and hi-tech industrial space also saw rents drop in Q4 2015 the first time since Q3 2012.

Average monthly gross rents of hi-tech industrial space dipped by 1.5 percent quarter-on-quarter to S$3.25 per sq ft in Q4 2015, while the monthly rents of business parks fell by 2.4 percent quarter-on-quarter to S$4.98 per sq ft.

For the whole of 2015, rents of hi-tech industrial space increased by 1.6 percent, while business parks rents declined by 0.4 percent.

With 1.5 million sq ft of lettable business park space entering the market this year, DTZ expects rents of business parks to face greater downward pressure given the subdued business confidence.

Moreover, the softening of office rents and projected completions of office developments within the CBD this year will exert further pressure on rents of business parks.

Although market conditions for business parks are anticipated to be weaker in 2016, it is an opportune time for companies with expiring leases to review their accommodation strategies and leverage on market conditions to upgrade to better quality space. Additionally, landlords are likely to be more pragmatic and flexible in packaging competitive lease terms to attract and retain tenants, said Cheng Siow Ying, DTZs Executive Director of Business Space.

File photo: Buildings at the International Business Park.

Nikki De Guzman, Editor at CommercialGuru edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg

More from PropertyGuru:
Mortgagee auctions on the rise
Man loses bid to retrieve sons share of condo
JLL wins award for world's best property consultancy