Caution seeping into industrial property sector

Straits Times: Mon, Sep 19
THE weakening sentiment being seen in the residential property sector is slowly seeping into the industrial market. A combination of bad news and dire warnings about everything from European debt to a slowing local economy to tighter foreign lab…

THE weakening sentiment being seen in the residential property sector is slowly seeping into the industrial market.

A combination of bad news and dire warnings about everything from European debt to a slowing local economy to tighter foreign labour policies is adding to a mood of uncertainty, say experts.

The price signals are not encouraging.

Last week, a 1.88ha 60-year leasehold site in Woodlands Avenue 12 zoned for light and clean industry and warehouse use attracted four tenders and a top bid of $72 million, or $142 per sq ft per plot ratio (psf ppr).

Go back to June and a plot next door sold for $152 psf ppr, 6.6 per cent more, with nine developers in the hunt.

Mr Dominic Peters, Savills’ director of industrial and business space, said the perceived abundance of industrial space in selected areas is also holding back developers.

‘Several sites have been sold in the (Woodlands) area within the last few months, so developers could also be wary of whether the demand for space in the area will meet the oncoming supply,’ said Mr Peters.

But the slowing economy is playing a part as bosses weigh the risks of investing in property.

All eyes will be on two industrial land tenders that are closing next month – one in Kaki Bukit Road 4, and the other in Lavender Street – with analysts expecting cautious bids.

ABT Medical Products, an importer and distributor of medical and industrial disposable goods, has spent the last few months scouting for a warehouse to buy.

‘We had found a place in the Yishun area, and it tied in very nicely with our plans because the current lease on our warehouses expires in mid-2012,’ said director Jeffrey Wong.

‘But given the current situation, we are just going to hold off for now.’

Mr Wong said many businesses are already responding to the subdued mood surrounding the economy.

‘Like us, many companies would rather stay put and watch what is going to happen within the next six months,’ he said.

But developer Oxley Holdings is unfazed by the worries over the global market and is going ahead with its scheduled project launches.

Chairman and chief executive Ching Chiat Kwong said its latest industrial project in Ubi – Oxley BizHub 2 – is in its preview launch phase, and the response has been encouraging with agents reporting many inquiries and visitors to the showroom.

‘Singapore, although affected, is good for more growth and this could mean that more businesses and investors are more encouraged to put their money into Singapore,’ said Mr Ching.

The office segment has not been spared either.

Investment analysts at OCBC Bank said the uncertain economic outlook is likely to affect job creation and, eventually, demand for office space.

OCBC estimates net job creation in key industries such as finance, business and information communication could fall from this year’s 65,000 to 55,000 a year over the next two years.

The report said recent announcements of future office developments in the Central Business District have dispelled any talk of a limited supply over the next few years.

Based on its predictions, OCBC said the total office stock could hit 84.8 million sq ft by the end of 2013, an ample supply that could see vacancy rates stabilising at about 12 per cent, with rents down by between 5 per cent and 8 per cent in the central and city fringe areas.

cherlim@sph.com.sg

PRICE SIGNALS NOT ENCOURAGING

In September: A 1.88ha 60-year leasehold site in Woodlands Avenue 12 zoned for light and clean industry and warehouse use attracted four tenders and a top bid of $72 million, or $142 psf ppr.

In June: A plot next door sold for $152 psf ppr, or 6.6 per cent more, with nine developers showing interest.
Source: The Straits Times © Singapore Press Holdings Ltd

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