Strata industrial property prices to fall: report
Transaction volumes in the strata industrial segment hit an all-time low in Q2 2014, which translates to only one third of the 633 units recorded during its peak in Q2 2011, revealed a latest report by HSR Research.
Notably, investors were drawn to the strata industrial segment in late 2010, after the government introduced multiple rounds of residential cooling measures.
The move saw strata industrial prices increase by 30 to 80 percent across the planning regions from Q2 2011 to Q2 2014.
To curb speculation in this segment, the government implemented various measures including seller's stamp duty (SSD) and the total debt servicing ratio (TDSR).
The measures significantly slowed down transaction volume, with only 218 transactions posted in Q2 2014.
"This works out to a decline of 59.2 percent year-on-year and represents only one third of the peak of transaction volume in Q2 2011 (633 units)," said the report.
In view of the low transaction volume, strata industrial prices stagnated, with median prices actually dropping five percent quarter-on-quarter in Q2 2014.
Over at the rental front, total industrial volume fell 18.3 percent quarter-on-quarter and 26.7 percent year-on-year.
Specifically, rents for multiple-user factories, warehouses and business parks increased between one and 5.3 percent, while rent for single-user factory dropped eight 8.3 year-on-year.
Meanwhile, the Ministry of Trade and Industry (MTI) announced in late 2013 that JTC Corporation (JTC) will take on the role as land sales agent of sites launched under the Industrial Government Land Sales (IGLS) programme from 2014 onwards.
"Additionally, four other changes where announced for IGLS sites sold to ensure functionality of multi-user industrial units built," noted the report.
Thereafter, JTC unveiled changes on subletting rules, with effect on 1 October 2014.
Under the new rules, end-user lessees and third party facility providers will only be allowed to sublet up to 30 percent of their allocated gross floor area, while anchor subtenants will have to fulfil a minimum occupation period of three years. Lastly, JTC's tenants will no longer be allowed to sublet their premises.
Going forward, HSR believes that JTC's move to undertake the IGLS programme "will curb speculative activities within the strata industrial segment."
Nonetheless, it expects to "continue to see low sales activities in the strata industrial properties segment in 2H2014. This will in turn exert downward pressure on prices."
Muneerah Bee, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email muneerah@propertyguru.com.sg
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