Industrial mortgagee listings reached its largest number in five years, with 13 industrial properties placed on the auction block in Q1 2016, a report from Colliers International revealed.
The record-high number of mortgagee listings is attributed to the tougher conditions in the industrial property rental market, said Grace Ng, the consultancy’s Deputy Managing Director.
“Owing to macro-economic uncertainties, end-users and industrialists have been cost sensitive and cautious about their space requirements. Competition for qualifying tenants has also intensified, following the net addition of approximately 5.7 million sq ft of new multi-user factory space in 2014 and 4.8 million sq ft in 2015.”
“Consequently, many small-scale investors who entered the industrial property market before the government’s imposition of the Sellers’ Stamp Duty (SSD) and Total Debt Servicing Ratio (TDSR) requirements in 2013, are now finding it challenging to secure tenants to help service their bank loans. And the situation has worsened for investors who hold multiple units,” added Ng.
Meanwhile, two offices and seven retail units were put up for sale by banks during the first quarter. This is in contrast to Q4 2015, when zero offices and only three retail units were placed under the hammer.
In addition, no single office mortgagee listings were recorded for the whole of 2015, while 13 retail properties went under the hammer.
“This is a reflection of the tough investment environment and rental market, as tenants and small businesses continued to be affected by the high business operating cost and manpower shortages,” added Colliers.
In total, banks placed 70 properties for auction in Q1 2016. Of these, 22 are commercial properties, while 48 are residential units.
Look ahead, more commercial and industrial units are expected to be put up for auction this year as banks repossess properties from small investors struggling to repay their loans and companies affected by tougher business climate and the slump in the in the oil and gas sector.
“Owners or investors with retail properties at unfavourable locations will be at higher risk of loan default due to the difficulties in securing tenants,” noted Ng.
She estimates that the number of mortgagee listings could surpass 270 units for the whole of 2016, while sales could reach S$70 million.