Colliers International, Singapore

A recent research study by Colliers International revealed that while most property sectors saw a moderation in market activity and rental growth in 1Q 2008, the industrial sector had bucked the trend and emerged as the star performer, recording rental growth of up to 16%.

The sizeable spillover demand from the supply-stricken office sector was the main driving force for the surge in industrial rents. As office rents continued to rise amidst tight supply, many more companies requiring high building-specifications turned to hi-specs industrial space as an alternative for their business operations. The Alexandra Road neighbourhood with its concentration of hi-specs industrial buildings such as The Comtech and Alexandra Technopark, and the Changi Business Park (CBP) are particularly popular with such office users. 

Mr Tan Boon Leong, Director for Industrial Sales and Leasing of Colliers International says, “The Changi Business Park is fast becoming a hot ground for financial institutions to house their backroom operations. Hot on the heels of Citibank and DBS Bank’s announcement to relocate some of their operations to built-to-suit office complexes in CBP, Standard Chartered Bank was reported in February 2008 to be making similar moves. It is expected that more banks, are likely to jump on this bandwagon soon.”

“The un-sated demand for hi-specs industrial space by qualifying office users has driven the average monthly gross rents of such space up by 16% to S$3.98 per sq ft per month in 1Q 2008 from S$3.44 per sq ft per month seen in 4Q 2007.

In the popular Alexandra Road locality and CBP, hi-specs industrial spaces are commanding average monthly gross rentals of as much as S$4.80 per sq ft. At New Tech Park, a 10,000-sq ft space was known to be leased to a UK footwear, fashion and accessories company for a monthly gross rent of S$4.20 per sq ft in 1Q 2008,” continues Mr Tan.

The hi-specs industrial market was not the only industrial segment feeling the heat from the office supply crunch. Office demand had also spilled over to the light-industrial factory segment, driving up the monthly gross rents of prime conventional flatted factories in central Singapore by 11.8% for ground floor space and 10.6% for upper floor space to average at S$2.36 per sq ft and S$1.77 per sq ft respectively.  

Mr Tan says, “Robust demand from qualifying office users had resulted in the heightened popularity of conventional flatted factories in the Bukit Merah/Alexandra Road locality. The proximity to the CBD has made these industrial properties an ideal alternative for qualifying office users, especially those who do not require exceptionally high building specifications, looking for cheaper business premises.

So intense is the demand for such properties that the newer and more modern flatted factories such as Cendex Centre and E-Centre were commanding average monthly gross rents in the region of S$3.20 per sq ft to S$4.00 per sq ft as of 1Q 2008. This is higher than the rates commanded by flatted factories in the traditionally prime Macpherson area.”

In the warehouse segment, strong demand was seen for logistic space from third-party logistics service providers and industrialists. The average monthly gross rents of prime warehouse space rose to S$2.35 per sq ft for ground floor space and S$1.72 per sq ft for upper floor space in 1Q 2008, up from last quarter’s S$2.08 per sq ft and S$1.60 per sq ft respectively.

Ms Tay Huey Ying, Director for Research and Consultancy of Colliers International says, “Demand for industrial space from industrialists remained healthy on the back of continued expansion of the manufacturing sector. Multinational companies have continued to plough in investments into Singapore’s manufacturing sector.

In 1Q 2008, they had committed to more than S$3 billion worth of manufacturing investments in Singapore, which include a S$834 million Butyl Rubber manufacturing plant by Lanxess, a S$417 million solar wafer plant by NorSun to produce monocrystalline silicon wafers for the global wafer market and a S$250 million world-scale Steam Methane Reformer by Soxal to supply hydrogen to Neste Oil’s Renewable Diesel Plant.”

Surging rents continued to support capital values. Average capital values of prime freehold industrial space inched up by an average of 4.7% in the quarter. Capital values of prime freehold factory factories averaged at S$548 per sq ft for ground floor space and S$430 per sq ft for upper floor space while those for prime freehold warehouses averaged at S$496 per sq ft and S$366 per sq ft for ground and upper floor space respectively.

Industrial properties in the Bukit Merah area led the price trend in 1Q 2008. Units in the newly completed 60-year leasehold Cendex Centre along Lower Delta Road were transacting at an average of S$610 per sq ft with the highest price of S$680 per sq ft being garnered for a 1,100 sq ft unit on the sixth floor in February 2008. 

“Moving forward, underpinned by spillover demand from the office sector and healthy demand coming from industrialists, demand for industrial space is expected to remain robust in 2008 despite the current global uncertainties. Rents of conventional factories and warehouse space could see a further increase of up to 15%, whilst those of hi-specs space could rise up to 20% for the rest of 2008. Capital values of industrial properties are expected to see moderate increase up to 10% for the rest of 2008,” says Ms Tay.

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 10,092 employees span the world in 267 offices in 57 countries. On a worldwide basis, Colliers manages 672,945,918 square feet, and has revenue of $US 1,620,958,349.

Contact Information

Doris Boo
Associate Director,Marketing and Communications
Tel: 65 6223 2323
Direct: 65 6531 8610

Tay Huey Ying
Director,  Research and Consultancy

Tel: 65 6223 2323

Direct: 65 6531 8658

Tan Boon Leong
Director, Industrial Sales and Leasing

Tel: 65 6223 2323

Direct: 65 6531 8682

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