19 October 2015 - Leading global commercial real estate services firm, Colliers International Group Inc.’s (NASDAQ: CIGI; TSX: CIG) latest quarterly report on the industrial property sector showed that the mood in the industrial property market was subdued and cautious in 3Q 2015. Consequently, the sector witnessed fewer leasing transactions, stagnant rents and low strata-titled sales.

Leasing Market

The number of leasing deals (inclusive of warehouse, factory and business park premises) fell from 2,392 deals achieved in 2Q 2015 to 2,081 in 3Q 2015, according to the rental records by URA’s REALIS as of 15 October 2015.

Mr Tan Boon Leong (陈文龙), Executive Director of Industrial Services, says, “Industrialists were seen exercising greater caution and taking a longer time to commit to their real estate requirements during the quarter, amid growing macro-economic uncertainties.

Cost containment also continued to feature prominently on tenants’ corporate real estate agenda when they assessed their space needs. This affected the volume of leasing deals and weighed down on rents. Landlords were also seen adopting a more flexible stance during negotiations.”

Consequently, rents in 3Q 2015 either stagnated or eased across all the different categories of industrial space.

In the prime conventional factory space segment, the average monthly gross rents eased by another 0.4 per cent quarter-on-quarter (QoQ) and 1 per cent QoQ for ground- and upper-level space, respectively, to S$2.51 per sq ft and S$2.02 per sq ft as of 3Q 2015.

The average monthly gross rent for ground-level prime conventional warehouse space held steady for the third consecutive quarter at S$2.49 per sq ft. However, that of the upper-level space shed another 1 per cent QoQ to S$1.90 per sq ft.

Meanwhile, the average monthly gross rent of business park space islandwide eased by 0.2 per cent QoQ to S$4.16 per sq ft in 3Q 2015. 

However, the average monthly gross rents for independent high-specification (high-specs) industrial developments located outside the science and business parks stayed firm at the preceding quarter’s level of S$3.31 per sq ft for the ground-level space and S$3.13 per sq ft for the upper-level premises. 

Sales Market

Sales of strata-titled industrial properties stayed expectedly low in 3Q 2015.

Preliminary caveat records obtained from the URA’s REALIS as of 15 October 2015 showed that the number of caveats lodged fell from 289 in 2Q 2015 to 176 in 3Q 2015.  This is the lowest quarterly sales seen since the 177 and 132 caveats recorded in 4Q 2008 and 1Q 2009, respectively.

Mr Tan comments, “Prospective buyers’ caution towards committing to any major long-term real estate purchases, in the wake of a more challenging economic and manufacturing environment, was seen as a major underlying sales barrier during the quarter. This contributed to the stalemate in the strata-titled industrial sales segment, which was already reeling from the lingering effects of the Total Debt Servicing Ratio (TDSR) requirement and persistent price gap between buyers and sellers.”

He adds, “Nonetheless, sellers generally still held on to their price expectations in 3Q 2015. Some owners, such as those with prime freehold conventional industrial properties, were observed to have more holding power and, therefore, were not compelled to drop their asking prices. This helped the average capital values of such premises to hold constant in 3Q 2015.”

The average capital values of ground- and upper-floor prime freehold conventional factory space were stable at the preceding quarter’s level of S$863 per sq ft and S$735 per sq ft, respectively, as of 3Q 2015.

Similarly, the average capital values of prime freehold conventional warehouse space were unchanged for the seventh straight quarter at S$661 per sq ft for ground level premises and S$587 per sq ft for upper-level space as of 3Q 2015.


Going forward into 4Q 2015, market conditions in the industrial property market are expected to remain challenging.

Mr Tan says, “Taking into account the global downside risks and lacklustre manufacturing sector performance, most industrialists are expected to stay cost conscious and cautious with their business and real estate needs. This might lengthen the decision-making process.

Additionally, with ample available choices in the market, resulting in heightened competition for qualifying tenants, rents could continue to ease in the months ahead.”

Rents for prime multi-user conventional industrial space are projected to dip further by up to 1 per cent in 4Q 2015, while business park rents could experience a small rate of decline, similar to that seen in 3Q 2015. However, rents for independent high-specs industrial premises could remain stable for the rest of the year on the back of limited supply.

Activities in the strata-titled sales segment are similarly expected to stay depressed, with buyers being more selective with their purchases. Despite this, the average prices of prime freehold conventional industrial properties are projected to hold steady, as most owners are not likely to relent on their asking prices and may prefer to lease out their properties instead.