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Sales of industrial properties continued to fall in the last quarter, while rents for most segments weakened further, according to the latest report from Savills.
Based on data from the Singapore Institute of Surveyors and Valuers REALink as of 19 January 2015, only 422 caveats were lodged for warehouse and strata factory sales in the fourth quarter. This represents a 22.4 percent quarter-on-quarter drop and 34.2 percent decline from the same period a year ago.
“Overall sales in 2014 shrank 40.2 percent from the 3,379 caveats lodged in 2013, marking this as the third consecutive year of decline,” said the consultancy.
Prices of upper-storey factory and warehouse spaces tracked by Savills also moderated in the last quarter compared to the corresponding period in 2013.
Specifically, freehold industrial properties suffered the largest quarterly price drop of 3.4 percent, while prices of leasehold units dipped by 0.4 percent. In contrast, values of 60-year leasehold premises rose by 0.6 percent in Q4 2014.
In the rental market, leasing volume slid by 1.6 percent to 1,432 deals in October and November 2014 versus 1,456 deals during the same period in the previous year.
Although the figure for December has yet to be tallied, the tentative total leasing deals for Q4 2014 is down 30.5 percent from 2,060 deals a quarter ago.
“Given this shortfall, it is unlikely that the final figure for Q4 2014 will exceed the preceding quarter. Looking at the year’s performance, the total transactions for 2014 is likely to reach 8,000, surpassing the 7,635 deals recorded in 2013,” Savills noted.
Rents of factory and warehouse space also declined by 2.5 percent on a quarterly basis from S$2.00 to S$1.95 per sq ft per month in Q3 2014. On the other hand, rents of high-tech premises remain unchanged at S$3.00 per sq ft per month in the last quarter.
The softer rents in Q4 2014 is attributed to the completion of new strata industrial properties like Woodlands Horizon and Premier@ Kaki Bukit, and stiffer competition from industrial space in Malaysia, which are benefitting from the lower oil prices and weaker currency exchange rate.
“Some landlords have also accepted rents below their initial demands for fear that increasing interest rates will balloon their borrowing cost if the units remain vacant for too long,” it said.
In contrast, rental demand for business park space remained robust with 46 leasing deals signed in October and November 2014, although this a 37 percent drop from the previous quarter.
While December’s figure has yet to be added, the tentative total number of deals for 2014 is already 38.4 percent greater than 2013’s overall figure.
Looking ahead, sales of strata industrial properties are expected to remain weak this year due to low rents, a supply glut, falling oil prices, interest rate hikes and the government’s cooling measures.
“The existing large supply of 30-year leasehold strata units will continue to depress their price levels and lead to a domino effect, dragging 60-year leasehold and freehold prices down as well. Falling oil prices have also stymied expansion plans of companies involved in the sector.”
In particular, prices of strata industrial units are expected to fall by 8 percent for the 30-year leasehold segment and 5 percent for both 60-year leasehold and freehold, while rents are projected to drop by 5 percent in 2015, added Savills.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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