THE industrial property market may be weak but the Urban Redevelopment Authority has received a successful application for the release of a 2.5-hectare plot at Woodlands Industrial Park E5.
The minimum $12.5 million that the successful applicant has undertaken to bid at tender for the 60-year leasehold plot works out to $18.57 per square foot of potential gross floor area (GFA).
The plot has a maximum 2.5 plot ratio, which means it can be built up to a GFA of 673,077 square feet. The maximum building height is 10 storeys.
The site is zoned for Business 2 development, suitable for a range of uses such as clean/light industry, general industry and warehousing.
Colliers International director (industrial) Tan Boon Leong reckons that the plot is likely to draw a handful of bidders, with the top bids at around $20-23 psf per plot ratio (psf ppr).
Developers that are also involved in the construction business are best placed to bid for the site as they have better control of construction costs, he reckons.
Mr Tan estimates that construction costs to build an industrial project on the site could be around $100 psf of GFA - about five times the minimum land bid.
'The more space the developer builds, the bigger his outlay will be relative to his investment in the land. Because of the poor economic outlook translating to weaker demand for industrial space, and construction costs being so high in relation to land cost, it may not make sense to fully maximise the plot ratio.'
The site is next to an earlier plot sold at a state tender that closed in July last year (before Lehman's collapse) to Soilbuild Group Holdings for $30.10 psf ppr.
Soilbuild is expected to launch for sale later this year a flatted factory and terrace factory project on the plot.
An industrial property market watcher, observing SMEs' penchant for landed factories, quipped: 'I guess that just like our towkays like to live in their own landed homes instead of condos, they also fancy owning their own landed factory with a carpark lot in front.'
Flatted factories in the Woodlands area are said to be fetching a median price of about $180-190 psf of net saleable area (NSA), while terrace factories are worth about $170-190 psf of NSA.
About 11.5 million sq ft of net new industrial space is expected to be completed this year, or 8.5 per cent higher than last year's net new supply of 10.6 million sq ft.
Given the easing in demand, the higher supply will put downward pressure on rents.
'However, this downward pressure on rentals will be cushioned by the fact that about 40 per cent of 2009's new supply is of the single-user type, of which most is built-to-suit and hence already
committed,' said Colliers director for research and advisory Tay Huey Ying.
The average gross monthly rental value for ground-floor prime factory space eased 12.2 per cent quarter-on-quarter to $2.16 psf in Q1 2009, while the average ground-floor prime warehouse rent slid 10.2 per cent over the same period to $2.20 psf a month.
The average monthly rental for high-specification industrial space dipped a smaller 5.7 per cent to $3.82 psf.
Source: Business Times, 27 May 2009