Friday, May 14, 2010

Factory rents may rise 10%: Colliers

(SINGAPORE) Rents, land values and capital values of conventional industrial space in Singapore could rise 10 per cent in the next 12 months, as the economy improves and institutional investors return, said Colliers International yesterday.

The consultancy found that the market for factories and warehouses has already picked up in the six months from October last year to March this year.

During the period, the average monthly gross rent for single-user factories in central Singapore increased by about 3.8 per cent to $1.35 per sq ft. Capital values for this type of property also inched up 3.6 per cent to $145 psf.

Separately, warehouses in the eastern part of the island saw their average monthly gross rent rise 6.7 per cent to $1.28 psf. Their capital values also went up 6.2 per cent to $138 psf.

Conditions were not as rosy for high-specification industrial developments - rents for this type of space continued to fall, albeit at a slower rate. Over the six-month period, the average monthly gross rent for high-spec space dropped 5.1 per cent to $2.78 psf.

The silver lining is that the occupancy rate for high-spec space has been stable. Colliers attributed this to firmer office rents in a recovering commercial market - this has discouraged tenants occupying high-spec space from moving back to offices.

Colliers expects the overall industrial property market here to do better as the economy continues to pick up. 'The recovery in the exports and manufacturing sector should support an expansion in demand from manufacturers,' its research and advisory director Tay Huey Ying said.

'Coupled with the return of institutional funds to the industrial market, rents, land and capital values of single-user factories and warehouses are expected to increase up to 10 per cent in the next 12 months.' Ms Tay also expects rents of high-spec space to bottom out this year.

Besides Singapore, most Asia-Pacific cities have seen their industrial property markets stabilise, Colliers noted. For instance, industrial rents in Delhi, Guangzhou, Shanghai and Hong Kong have hit the trough.

Source: Business Times, 14 May 2010

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