Industrial property rents fall for 4th straight quarter

But Q3 drop is smaller than Q2's; gap with office rentals narrows

PRIVATE industrial property rents fell for the fourth consecutive quarter in the three months ended September, although the pace of declines eased.

Data from DTZ Research shows that the average gross monthly rental value for first-storey private conventional industrial space fell 2.4 per cent to $2 per square foot in Q3 from $2.05 psf in Q2.

The drop was smaller than the 6.8 per cent slide seen in Q2. Similarly, the average rent for upper-storey space slipped 5.9 per cent to $1.60 psf in the latest quarter, smaller than Q2's 8.1 per cent.

DTZ noted that the rental slide for high-tech industrial properties, which include business park and science park space, also moderated in the third quarter. After a 12.8 per cent drop in Q2, the average monthly rent for such space declined 5.9 per cent to $3.20 psf in Q3.

From their peak in Q3 last year, average monthly rents of first-storey and upper-storey private conventional industrial space have slipped 14.9 per cent and 22 per cent respectively. The average high-tech industrial rental value has lost 28.9 per cent over the same period.

However, office rentals have fallen even more substantially than that and as a result, the gap between high-tech and office rents in suburban locations narrowed significantly in Q3.

Data from DTZ shows that the average monthly high-tech industrial rental value of $3.20 psf in Q3 was just 8.6 per cent lower than the $3.50 psf monthly average rent for offices in Tampines Finance Park.

'Despite the narrower rental gap, many occupiers are unlikely to relocate from high-tech industrial space back to office space. The relative rental stability of high-tech industrial space compared to the volatility in office rents is a consideration for occupiers taking a long-term perspective,' DTZ said.

Chua Chor Hoon, head of South-east Asia Research, said: 'Rents for industrial space are likely to remain weak going into 2010, due to the large incoming supply and weak demand.'

About 27.1 million square foot of private industrial space are in the pipeline, due to be completed by 2013. Of this, an estimated 10.4 million sq ft is expected to enter the market in the current half, including major projects such as Northstar@AMK, The Kendall and DBS Asia Hub.

Source: Business Times, 1 Oct 2009