International property consultant, Colliers International’s latest bi-annual global industrial real estate report revealed that industrial property markets worldwide are showing signs of recovering in 2H 2010 – with Asia Pacific continuing to be the most robust region, North America registering a pick-up in leasing activity and Europe, Middle East and Africa (EMEA) reporting a modest growth.
The report tracks industrial property performance across 150 cities worldwide between July and December 2010.
Prime Warehouse Space (industrial space of 20,000 sq ft or more, with up to 15 per cent office space)
Singapore retained its global position as the seventh most expensive warehouse location worldwide at US$15.71 per sq ft per annum (or S$1.69 per sq ft per month in local currency terms) in 2H 2010. This is a 17.4 per cent growth from the US$13.38 per sq ft per annum registered in 1H 2010.
Tokyo and London-Heathrow also maintained their top two positions, at US$22.56 per sq ft per annum and US$20.11 per sq ft per annum, respectively.
Ms Chia Siew Chuin (谢岫君), Director of Research & Advisory of Colliers International, says, “The comparatively-higher growth for Singapore across the six-month period was underpinned by an expansionary demand for warehouse space amid an improved business environment, as well as the continued strengthening of the Singapore Dollar against the US Dollar.
Although Singapore’s 17.4 per cent rental growth surpassed Hong Kong’s five per cent increase during the review period – which also translates to a dilution of the Republic’s cost competiveness against Hong Kong to some extent, the Lion City continues to maintain her competitiveness against her closest rival in the region, with prime warehouse rents in Singapore still about eight per cent more affordable than that of Hong Kong’s.”
Bulk Warehouse Space (industrial space of 100,000 sq ft or more, with up to 10 per cent office space)
Singapore climbed from the 10th position in 1H 2010 to the 8th position in 2H 2010, commanding a bulk warehouse rent of US$12.08 per sq ft per annum (S$1.30 per sq ft per month in local currency terms).
This is a 10 per cent growth from 1H 2010’s figure of US$10.98 per sq ft per annum, which was similarly buoyed by an expanding demand on the back of optimistic business sentiment, as well as a stronger Singapore Dollar against the Greenback.
The top three positions were bagged by Tokyo (US$23.25 per sq ft per annum), London-Heathrow (US$18.56 per sq ft per annum) and Zurich (US$15.81 per sq ft per annum), respectively.
Ms Chia says, “The uplifting sentiment experienced in 2H 2010 has continued into 1Q 2011, during which demand for industrial space in Singapore remains on an expansionary mode. Average monthly gross rents of factories and warehouses were lifted by another 3.4 per cent to 4.8 per cent quarter-on-quarter in 1Q 2011. This is on the back of optimistic business sentiment from Singapore’s strong manufacturing rebound in 2010, as well as the Republic’s position as a choice location for high value-added operations.”
As of end-March 2011, prime factory space was commanding average monthly gross rents of S$2.10 per sq ft for ground floor space and S$1.82 per sq ft for upper floor space, while the corresponding rates for warehouses were S$2.20 per sq ft and S$1.77 per sq ft, respectively.
Ms Chia continues, “The recent unrest in the Middle East and North Africa, as well as the after-effects of the catastrophe in Japan, poses possible disruptions to Singapore’s trade and investment flow, which could impact negatively on the outlook for the industrial market.
Nonetheless, the government’s pro-active approach to supporting investment drivers in the economy has helped strengthen Singapore’s position as a highly sought-after place for manufacturing operations.
Together with efforts to build upon Singapore's position as a Global-Asia Hub, Singapore could attract more global and local mid-sized companies to set up their first Asian bases in Singapore and, in turn, support demand for industrial space.”
"Buoyed by the resulting continued positive sentiments and interest among manufacturers and logistics operators, industrial rents are expected to experience a steady growth of between 5 per cent and 10 per cent for the whole of 2011,” concludes Ms Chia.
Snapshots of the industrial property market by region:
- With Asia Pacific registering healthy economic growth and exporters boosting sales both within the region and globally, rents were steady or up in most of the 19 markets.
- Going forward, trade across the region will feel the effects of the Japan’s devastating earthquake and tsunami. Consequently, demand for warehouse space is expected to be sluggish compared to that of 2010.
- The United States (US) and Canadian warehouse markets registered a noticeable pick-up in leasing activity in 2H 2010 – with the demand in the US being concentrated in a number of port-related markets, and most markets in Canada enjoying a fairly brisk six-month period.
- With both the US and Canadian economies showing signs of recovery, industrial leasing markets are expected to remain relatively robust with a noticeable improvement in fundamentals by 2H 2011. Nonetheless, rental performance is still largely expected to be mixed for the balance of 2011.
Europe, Middle East, Africa (EMEA)
- Leasing markets in this region registered modest growth in 2H 2010, with various markets being still characterized by sluggish leasing activity and little expansion.
- While warehouse rents held steady in 2H 2010, Europe is still home to some of the most expensive warehouse rents in the world. London-Heathrow, Zurich and Geneva were in the top five most expensive industrial locations in the world.