Industrial growth-Property Market

By: Jaswinder Singh
Submitted: 2008-07-16 12:45:01
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The year of 2007 has been an unprecedented year for the industrial property market. The rentals and occupancy rates for all kinds of industrial space indicate the extreme demand which was present.

A number of business park sites were sanctioned, a fourth industrial REIT began functioning and 10 industrial sites were allotted in 2007. There was continuous increase in the average occupancy rate of prestigious space. It improved to 92.8% at the end of 2007 from 91.1% at the end of 2006. The average occupancy rate for business parks rose by 5% points each year and ended at a calculated rate of 89% in the end of 2007. Average monthly tariffs for factory slots advanced at a lesser pace to $1.45 per square foot and rents for ground and upper floor slots improved by $1.20 per square foot. Factory rents increased by $0.05 per square foot in every quarter of 2007. This was a surge over 2006. For the whole year rents were stationary at $1.25 per square foot for ground floor units and $1 per square foot for upper floor units. The average monthly rent for warehouses was $1.45 per square foot for ground floor units and $1.15 per square foot for upper floor units at the end of 2007 which was an increase from 2006 when the rents remained at $1.25 per square foot for ground floor units and $1.05 per square foot for upper floor units. The average capital cost for warehouses got boosted by about 10% in the year 2007 to reach $424 and $370 per square foot for ground floor units and upper floor units respectively. For the first time in Q3 07 the occupancy rate for warehouses passed the 90% mark. Factories showed steady increase in terms of occupancy rate.

2007 also witnessed the launch of a number of upcoming business parks. This includes business facilities in Changi Business Park with Citibank as the main tenant and the facility to be unveiled in the International Business Park. These two parks are predicted to be completed by some time in 2009. Singapore Science Park will go through an extensive $400-million renovation which will be completed in three different phases over the next decade. If everything goes as expected the two projects can attain a total gross floor area of 91,776 sm (987,877 sf). 10 industrial ($190.5 million) sites were revealed through the course of the year under the government land sales mission. This is an improvement over the seven sites ($86.9 million) awarded in the year 2006. The most notable tender was the 30-year leasehold Commonwealth Drive/Lane site which netted a record-high of $171 sf/plot ratio. The other nine sites launched in the year earned from $23 sf/plot ratio to $72 sf/plot ratio. MI- REIT revealed its IPO in April 2007 with tentative portfolio of 12 properties priced at about $316.2 million. The REIT also bought a warehouse in Japan for $29.2 million which was its first foreign purchase in Q4 07. Rents and occupancy rates of all kinds of industrial slots which include hi-tech buildings and business & science parks had a steady boost in 2007.

This trend is predicted to continue in 2008 as well. Manufacturing had a significant impact on the Singapore economy over the years. It has been expected that it will remain in that way in the upcoming years as well, particularly considering the strong support the manufacturing sector has been receiving from the government across the last few decades. The impacts of the recent US sub prime worries should have a significant impact on the demand for industrial space in the short-medium term. But when you consider the bigger picture manufacturers are presumed to continue with their investment plans in Singapore for the coming years. Thus the demand for industrial space can be expected to remain healthy.

Article source: Expert Articles