Despite the governmental measures such as halving the maximum industrial land tenure to 30 years, and introducing restrictions on subdivision in selected sites and requiring strata units to be at least 150 sq m, prices of industrial properties continued to rise rapidly, with the industrial property prices increasing by 26.7% from Q1 –Q3, and rents increasing by 6% in the same period. The average capital values of ground and upper floor prime freehold conventional factory space increased by 15.7% and 19.5% to $699 psf and $636 psf respectively from Q1 to Q3 while the average capital values of prime freehold conventional warehouse space, ground and upper floor space grew by 8.4% and 10.1% respectively in Q1 to Q3.
While the shorter tenure of GLS sites is intended to make land more affordable for industrialist to build their custom facilities, the objective would not be achieved if the developer succeeded in bidding for the site and strata-subdivide the development to attract investors instead of building facilities more suited to industrial needs. This may eventually lead to a lack of supply of suitable premises which will cause rents to increase while the unsuitable premises are rented out for unauthorised uses or left vacant.
Sales volume rose 10% from 2,871 units last year to 3,160 units in 2012, as a result of increase in investment purchases from both foreign and local investors, as well as an increase in purchases by companies (10.5% increase in 2012).
Looking ahead, the increase in industrial property prices is expected to slow down, as a result of factories relocating overseas, the 16 million sq ft supply of industrial space to be completed in 2013, though the market liquidity will continue to ensure demand. Industrial properties with attractive aspects such as good locations, facilities and longer tenures may see a price increase of 10-15% in 2013. Rents are also expect to increase by 3-5%.
Source: Business Times