Rents and prices of industrial property in Singapore may be heading for correction, driven by lack of reselling restrictions, low price quantum and good economic fundamentals.
Ong Kah Seng, Director at R'ST Research, said prices of strata industrial properties surged 30 percent last year, while rents increased between 15 and 20 percent.
He noted that the significant increase in prices may have superseded Singapore's economic fundamentals last year, especially since the increased interest in industrial real estate investment was primarily motivated by the cooling measures imposed on residential properties.
Ong expects prices of strata industrial property to correct by five to 10 percent this year, while rents increase by up to eight percent.
Meanwhile, the government has imposed various measures to make industrial land more affordable to industrialists. It also stepped up land supply under the Industrial Government Land Sales Programme, boasting nearly 24 ha of industrial sites in the reserve and confirmed list for the first half of 2012, compared with 16 ha in the 2H 2011 slate.
"Although industrial or manufacturing-related activities are expected to be further space-efficient with technological advances in the future, (existing) 'miniature' industrial properties may not be sufficient to cater to the needs of various industrialists," stressed Ong.
"Putting a cap on small industrial units will also moderate the new supply of such units, minimising longer term influx of such units and possible price corrections."
In addition, R'ST Research said that among the various tenures (30-, 60-, 99- and 999-year as well as freehold), the 60-year leasehold remains the most popular to buyers, with 1,251 units of 60-year leasehold strata factory units transacted last year, up nine percent from 2010. Among the top 60-year leasehold projects transacted last year were Midview City (pictured), Northstar@AMK, Wcega Plaza and Tradehub 21.
"Although 30-year leasehold tenures are even more affordable, it is seemingly short for industrialists especially those who have a longer term business horizon and who will find the property to have diminishing asset value in the longer term," said Ong.
"Most investors are also concerned about the resale value of the property if the tenure runs too short."
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