Wednesday, April 7, 2010

Industrial sector set for upturn

THE industrial market showed signs of improvement in the first quarter of the year, according to two new reports published today.

In its latest market analysis, CBRE points out that demand for factory and warehouse space here is steadily growing, despite rents showing no signs of rising yet.

In the second report, DTZ points out that the industrial sector has overtaken the residential segment as the dominant sector for investment deals, though it’s thanks largely to one buyer.

In the first quarter of the year, the largest investment deal was the sale of the $323 million CWT Commodity Hub to Cache Logistics Trust, said CBRE.

In all, Cache made six sale-and-leaseback deals amounting to $713.2 million, helping to catapult first-quarter industrial investment sales to $1.02 billion, or 38.5 per cent of total transacted value, noted DTZ.

Residential investments amounted to $879.2 million, with the bulk coming from the sale of government sites.

Private residential investment sales accounted for just 6.3 per cent of total residential deals.

It reports that while investment by local firms continued to dominate due to purchases by local developers and real estate investment trusts (Reits), more foreign buyers could be on the way.

Also, Reit acquisitions are restarting, and more office buildings are expected to be transacted for redevelopment into residential use, it said.

Mr Bernard Goh, CBRE’s director of industrial and logistics services, said: ‘The (industrial) market appears to have turned around from the past year. We are seeing an improved demand for industrial space and a rise in rents can be expected towards the tail end of the year.’

Currently, factory and warehouse rents have not risen since the first quarter of 2008, when they first dipped in the current cycle, said CBRE.

For instance, in the first quarter of this year, average monthly rents for factory units held firm at $1.40 per sq ft (psf) for ground floor space, it said.

Meanwhile, an industrial site in Yishun Avenue 6 has attracted seven bids. OKH Holdings topped the tender with a bid of $27.2 million or $71 psf/plot ratio.

The bid is 8.3 per cent above the second bid from Soilbuild Group Holdings and more than twice the application bid.

CBRE estimates the breakeven cost for this development at between $250 psf and $270 psf.

It said the healthy interest could be due to the lack of industrial sites in Yishun. A more positive business sentiment could have also played a part in the robust response to the tender, it added.

Source: Straits Times, 7 Apr 2010

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