Tag Archives: Industrial Rental

Rental growth for office space set to moderate in 2015: Analysts

Office rentals have been pushing higher in 2014, with tight supply pushing rentals up by more than 10 per cent.

Consultancy Jones Lang LaSalle (JLL) projects that rentals at office buildings in the Central Business District (CBD) – including Marina Bay, Shenton Way and Raffles Place – could grow by some 16 per cent, driven primarily by the tight supply of new office space in Singapore.

Looking into 2015, they said rental growth is expected to moderate in the first half of the year, in anticipation of new office projects. JLL said about 3 million square feet of office space will come on-stream in 2016 and 2017, including Marina One at Marina Bay, Duo in Bugis, V on Shenton, and Tanjong Pagar Centre. This new supply could put pressure on rentals, as it is twice the absorption rate of 1.2 to 1.5 million square feet.

On Dec 4, four sites with commercial components were placed on the Reserve List under the Government Land Sales programme for the first half of next year. They included plots in Holland Road, Beach Road, Woodlands Square and Marina View/Union Street. But some industry players said there is room for the Government to release more sites in the CBD.

Mr Warren Bishop, CEO of Raffles Quay Asset Management, said: “When you are talking about a site being released in 2015, it is unlikely to come to market until 2019-2020. We would probably see there is certainly room for the release of more land within the Marina Bay area. Looking at the longer term beyond 2018-2019, there will be consistent demand, what has been released is probably not going to be enough to meet that demand.”

Mr Bishop added that the demand for office space in the years to come will need to be met. Otherwise, “you end up with situations where perhaps you see office rentals rise”, he said. “We had a situation in 2007-2008 where there was an imbalance between demand and supply.”

Looking to future Government Land Sales programmes, analysts expect the urban planners to roll out more commercial sites in the suburban areas for sale under the Confirmed List. These include locations like Jurong East, Paya Lebar and Woodlands. Meanwhile, to meet demand for office space in the CBD, market watchers suggested that the Government could put some sites for sale on the Reserve List, which can be triggered for sale by developers.

Analysts said they have observed a new trend in the leasing market, with some deals going beyond the typical ‘three plus three years’ lease terms.

Dr Chua Yang Liang, head of research for Southeast Asia at JLL Singapore, said: “We are hearing some cases where landlords are chasing bigger occupiers and offering them slightly longer leases, such as ‘five plus five’ or ‘six plus six’. They are locking them in for a longer period. Likewise, from the tenants’ perspective, a longer lease in such instances helps them in terms of amortising their overhead cost – like their fit-out costs for example.”

Overall, analysts said sentiment in the industrial property market remains mixed as Singapore shifts towards higher value-added manufacturing and service-oriented sectors.

Mr Nicholas Mak, executive director of research and consultancy at SLP International Property Consultants, said: “One of the challenges facing Singapore going forward is the changing nature of our economy, as it becomes a more service-oriented one.

“I think the Government needs to re-define the type of uses and trades and businesses that are allowed to use industrial space. As e-commerce within our economy expands, there will be more demand for storage space. The authorities could also re-look how they could allow more e-commerce companies to use industrial space.”

Industrial rents are seen falling by 3 per cent this year and SLP International said they could continue to decline in 2015 – by about three to five per cent – if supply continues to outpace demand.

Source : Channel NewsAsia – 22 Dec 2014

Industrial and office property markets stabilising: DTZ Research

Singapore’s industrial and office property markets are showing signs of improvement.

Property consultancy DTZ Research on Wednesday said that islandwide office occupancy improved in the first quarter of this year.

The average islandwide office occupancy rate rose 0.7 percentage-point on-quarter to 92.4 per cent.

DTZ said the improvement in occupancy rate was due to an increase in demand.

There was also no new completion of office space in the first three months of this year.

However, office rents will bottom out only sometime next year, or by the end of the year.

This depends on whether the economy grows stronger than expected.

Separately, consultant CBRE said the booming residential market has driven many existing commercial building owners towards redevelopment.

CBRE estimates that about 1.2 million square feet of offices will be converted to mainly residential use up to 2013.

With the economy on a growth path, DTZ expects the industrial rental market to bottom out this year.

But they caution that the recovery will be at a slow pace, due to new supply coming on stream.

Source : Channel NewsAsia – 1 Apr 2010

Singapore’s office and industrial rents continue slide in Q2

Property consultancy DTZ said office and industrial rents here continued their downward trend in the second quarter this year.

For the office market, average monthly gross rents of prime offices in Raffles Place fell by 19 per cent to S$9.70 per square foot, compared to a 25 per cent fall in the previous quarter.

Office rents in the Central Business District (CBD) fringe and de-centralised areas suffered a larger fall compared to the previous quarter.

The rent in Beach Road and North Bridge Road slid by 20 per cent to S$6.20 per square foot per month, worse than the previous quarter’s 13 per cent fall.

With office rents – especially those in the CBD – falling substantially, the rental gap between those in the CBD and those outside has narrowed.

Office rents in Marina Centre were 14 per cent lower than those in Raffles Place, less than the 23 per cent gap recorded during the peak last year.

Turning to the industrial market, DTZ said average monthly gross rents fell by 6.8 per cent for first-storey private industrial space and by 8.1 per cent for upper-storey space. This is the largest rental contraction since the third quarter in 2003.

Due to the large supply overhang in the office and industrial markets, DTZ expects the two sectors to remain soft until 2011.

Source : Channel NewsAsia – 6 Jul 2009

Private home prices up 0.2% in Q2, slower than earlier estimate

Prices of private homes in Singapore grew at a slower pace in the second quarter than initially projected – climbing at just 0.2 per cent against an earlier estimate of 0.4 per cent.

This is a far cry from the 3.7 per cent growth in the previous three months.

Analysts said this is the first time that final numbers have come in lower than flash estimates, suggesting that home prices are finally softening.

Mass market homes are carrying the overall price increase in the private residential property sphere as luxury home prices nudge downwards.

Prices outside the central region were up by 0.9 per cent, compared to a 0.1 per cent dip in the core central region.

Leonard Tay, director of Research, CB Richard Ellis, said: “Overall, we see a return of volume in (the) residential market in second quarter as quite encouraging.

“In the next two quarters, at least for the whole of 2008, we think volume will be sustainable and we expect transaction volumes for new home sales to finish the year at 4,000 to 5,000 units.”

In the second quarter, 70 per cent of new home sales were from the non-central areas. Colliers said Singapore’s positive mid-term prospects on the back of the completion of its two integrated resorts and Marina Bay Financial Centre will help to hold prices steady, and ensure that they do not decline by more than 3 per cent in the third quarter.

Overall, analysts said the residential property sector fared reasonably well in the first half of 2008, given the difficult external environment.

Ku Swee Yong, director of Marketing and Business Development, Savills (Singapore), said: “Transaction levels, price levels have held up pretty well. Most people have forgotten that the transaction in the first half of 2005 is similar to that of today. So it’s not as bad as what the market thinks.”

In the public housing market, resale prices continued to increase on the back of strong demand. They rose by 4.5 per cent, up from 3.7 per cent in the first quarter.

Meanwhile, office rentals went up by 6.3 per cent in the second quarter – the lowest increase in the past two years.

Analysts said they expect rents to remain flat for most of 2009 before trending downwards in 2010 to what they call more sustainable levels of S$12 to S$15 psf per month in the core business district.

In the next six to 12 months, landlords are expected to shift from profit focus to tenant retention as tenants start resisting further rental price increases.

In the industrial property sector, strong demand has pushed the average occupancy rate for factories to its highest since 2000, at 93.1 per cent. The take-up for warehouses also increased by 0.4 percentage point in the second quarter.

Despite the healthy take-up for both types of industrial space, the rental index for warehouses has remained unchanged for the quarter, while the index for factories rose by only 2.3 per cent quarter-on-quarter in the second quarter, compared to a quarter-on-quarter increase of 5.7 per cent in the first quarter.

As such, demand for industrial space is expected to remain healthy in the third quarter, but rents may only see a slight increase.

Source : Channel NewsAsia – 25 Jul 2008