AFTER more than four years of steady increases, rents and prices of industrial space have finally caved in to the economic slowdown, falling 3.7 per cent and 6.5 per cent respectively in Q4 2008 from Q3.
The office sector also continued to weaken, with rents and prices sliding 6.5 per cent and 4.9 per cent respectively.
Falling rents are likely to provide some comfort to companies hit by slumping demand amid the downturn. And with the government pushing out cost-cutting measures in the Budget, some property owners could pass on savings to tenants.
Q4 data from the Urban Redevelopment Authority (URA) yesterday showed the first signs of weakness in the industrial property sector, as several consultants had expected. Until then, rents and prices had been rising quarterly since Q2 2004.
‘The economic turmoil and shrinking manufacturing sector slowed the take-up rate for factories and warehouses in the fourth quarter,’ said CB Richard Ellis Research’s executive director Li Hiaw Ho.
For instance, the amount of occupied factory space jumped 175,000 square metres in Q4, but this increase was lower than the 344,000 sq m in Q3.
Still, industrial rents chalked up a 4.2 per cent increase year-on-year in 2008. Prices also rose slightly, by 1.5 per cent. Performance was buoyed by strong take-up in the first three quarters of the year.
Unsurprisingly, the office sector softened again in Q4. ‘The continued price for office space reflects limited investor interest in quality office buildings as economic sentiment remains pessimistic,’ said Knight Frank’s director of consultancy and research Nicholas Mak.
Office rents rose 5.8 per cent year-on-year in 2008, but this was disappointing compared with 2007, when they soared 56.1 per cent. Prices in the office sector fell 7 per cent in 2008, a striking turnaround from the 32.6 per cent gain in 2007.
Mr Mak expected the office market to continue to weaken this year, but said that he sees a silver lining. ‘Sombre economic conditions will encourage office space providers to be more understanding,’ he said. ‘Landlords will be more willing to retain tenants by renewing leases at lower rents, and offer more generous incentives such as longer rent-free periods.’
The Budget’s 40 per cent property tax rebate for industrial and commercial properties in 2009 could also help. ‘The government strongly urges landlords to pass on the benefits of this rebate to their tenants,’ Finance Minister Tharman Shanmugaratnam said in Thursday’s Budget statement.
To help reduce business costs, ‘we intend to pass on the property tax rebates to tenants of CapitaLand’s wholly owned commercial and industrial buildings as well as the portfolio of properties owned by CapitaCommercial Trust’, a CapitaLand spokesperson said. Similarly, ‘we will pass on the property tax rebates in full to our tenants in properties owned by CapitaLand Retail and CapitaMall Trust’.
City Developments also told BT that it is looking at various ways to pass on savings to its tenants.
Source: Business Times - 24 Jan 2009
No comments:
Post a Comment