Experts have said that commercial and industrial property will continue to outperform the office market this year.
This comes after Urban Redevelopment Authority (URA) figures showed higher quarterly prices for industrial (4 per cent quarter-on-quarter) and commercial assets (13.8 per cent quarter-on-quarter). Meanwhile, city rentals have slowed.
The trend of cooling office rents is clear. While URA’s rental index rose 8 per cent last quarter from a year earlier, it was the slowest rise in 2011, up by just 0.6 points from the previous quarter.
Chris Koh, a property analyst, said: “Many have kept their space, renewed their leases. If they did take up more space, they were a bit more conservative in taking up the space. So we did not see rental prices increasing at such a large volume.”
A brutal combination of economic uncertainty and an oversupply of office space has set the tone for 2012.
Colin Tan, research consultancy head at Chesterton Suntec International, said: “Grade A depends on banks and financial institutions. And the outlook for this industry has been, in a sense, depressed looking forward. So the demand from tenant group has shrunk. So I expect office numbers to weaken, led by Grade A.”
And in the persistent low interest rate environment, property analysts note that foreign investors have been pushed to look at buying commercial and industrial properties instead, especially after the recent Additional Buyer’s Stamp Duty on residential property.
Angela Lee, managing director of Lianco International Property, said: “Industrials like marine and chemical industry are expanding this year. Therefore, we expect pricing at 5 per cent up, minimum for the warehouse property sector.”
With output from the marine and offshore sector expanding by 19 per cent last year, experts expect strong demand for industrial space, while upcoming shopping malls should be easily absorbed.
Retail property is expected to face the least headwinds. Despite some fears of an oversupply in the coming years, some analysts said population growth has in fact reduced retail space per capita.
Source : Channel NewsAsia – 27 Jan 2012