2011-05-16

Singapore

Industrial property markets across most Asia Pacific cities continued to gain further growth traction between October 2010 and March 2011.

According to Colliers International’s latest bi-annual industrial property report, industrial property markets across most Asia Pacific cities continued to gain further growth traction between October 2010 and March 2011.

The encouraging growth was bolstered by the confidence of industrialists and investors – on the back of the Asia Pacific region being the healthiest economically, despite a series of geo-political shocks during the period.

The report tracks the capital and land values, and rents of three types of industrial properties – namely, single-user factory premises, single-user warehouse premises and multi-user high-specifications (high-specs) industrial premises – in 13 cities across 9 countries, from October 2010 to March 2011.  

Specifically, 162 of 184 industrial submarkets (or 88 per cent) across the 13 Asia Pacific cities surveyed experienced expansion or held steady during the review period.  There were only 149 submarkets (or 81 per cent) in the preceding six months ending September 2010.

The remaining 22 submarkets (or 12 per cent), which suffered contraction during the current review period, were mainly located in the quake-stricken Japan.

Capital and Land Values
Generally, growth of the industrial submarkets across Asia Pacific was led by the building and land sales markets.

On average, capital values of industrial properties escalated at a faster rate of 3.4 per cent between October 2010 and March 2011, compared to the 1.3 per cent average growth recorded in the previous six months. 

This was due to the robust performance of the region’s manufacturing sector and improved market sentiment which had spurred investors’ and owner occupiers’ interest in industrial properties.

Jakarta took the lead, where the average capital values of warehouse and factory premises in one of its cities, Bekasi, surged 20 per cent.

Meanwhile, land values across the region climbed by an average of 3.3 per cent during the review period.  This was higher than the 1.8 per cent improvement witnessed six months ago.

The acceleration in the growth of land values in Asia Pacific was due to an expansion in demand for land, resulting from increased manufacturing investments, on the back of the region’s booming economy.

Land supply, on the other hand, generally lagged behind demand.  This was particularly evident in Jakarta, where the average land values for factories in Karawang soared 26 per cent during the current review period.

In Singapore, capital and land values rose by up to 10.7 per cent. As of March 2011, capital values of single-user factory and warehouse space with a 30+30 year leasehold tenure averaged S$176 per sq ft and S$163 per sq ft, respectively, and the corresponding land values for these premises averaged S$103.86 per sq ft and S$70.83 per sq ft.

Ms Chia Siew Chuin (谢岫君), Director of Research & Advisory at Colliers International, says, “Investors’ confidence in investing in the Republic’s industrial properties has soared, underpinned by proactive approaches taken by the Singapore government to support the investment drivers for the economy and to strengthen Singapore’s position as the choice location for manufacturing operations.”

Rents
Growing at a slower pace compared to capital and land values, industrial rents rose an average of 2.8 per cent during the current review period.  It was a 2.2 per cent average growth in the previous review period.

Double-digit growth in rents was recorded for several factory submarkets in Shanghai and Hong Kong. 

Ms Chia comments, “Investor’s optimism in the Singapore industrial property market was boosted by the continued rise in factory and warehouse rents of up to 5.4 per cent in the six-month period ending March 2011. This was up from the 1.6 per cent increase seen in the last review period. As of March 2011, monthly gross rents averaged S$1.44 per sq ft for single-use factory space and S$1.37 per sq ft for single-user warehouse space.

Additionally, riding on Singapore’s continued robust economic growth, demand for high-specs industrial space remained in an expansionary mode between October 2010 and March 2011.  Companies’ increasing receptiveness to locating their qualifying business units and back-end operations that are not sensitive to CBD locations provided the additional boost in demand.

Consequently, rent for high-specs industrial space gained 11 per cent to average at S$3.13 per sq ft per month, up from the modest 1.4 per cent climb seen in the last six months. This made Singapore the top gainer for high-specs industrial rents among the submarkets surveyed during the current review period.”

Outlook
Moving forward, backed by the region’s sound economic fundamentals and the emergence of China as an independent engine of regional growth, coupled with the Economists Intelligence Unit’s expectations of Asia to remain the world’s fastest growing region in 2011, the outlook for industrial property market across Asia Pacific generally remains positive.

Most submarkets are expected to continue to post gains by up to 4.1 per cent, on average across the region in capital and land values, and rents over the next 12 months.

Ms Chia concludes, “The expected continued expansion of Singapore’s economy in 2011 should help to firm demand for industrial properties.  Meanwhile, the continuing demand for high-specs space by qualifying office users – amid expectations of strong office rental growth – is also expected to drive up rents of high-specs space.”

However, the projected moderation of 4-6 per cent in Singapore’s GDP growth, the unrest in the Middle East and North Africa, as well as the catastrophes in Japan, are dampeners that could moderate growth in single-user factory and warehouse land and capital values, and rents to up to 10 per cent for the next 12 months.  Rents of high-specs industrial space are also expected to grow by some 10 per cent.”