What recession? Industrial property is up for something else

Policies on hiring foreign workers need a review to further boost the sector, says Global Orion Properties.

“There may be signs of a global economic slowdown but there are no conclusive indicators that a recession is imminent. Should there be one, we believe in the resiliency of Singapore’s industrial sector and are confident that with the government’s pro-activeness and support, the impact will be minimized,” Global Orion director Satia Narjadin told Singapore Business Review.

According to Mr. Narjadin, industrial property prices are not expected to rise as much as they have in the last 24 months. A “strong” and “genuine” demand however is still expected thanks to recent cooling measures in the residential property market which cause rechanneling of investments to other areas including the industrial sector.

“The recent measures have created a larger pool of potential buyers which will drive demand in industrial developments. It has been reported that rental prospects in Singapore is the strongest in Asia Pacific and that rents were up 5% in the first half of 2011 compared to the previous year. Total returns on prime industrial property are expected to be approximately 12% over five years,” he said.

There is no fear of recession in the industry but Mr. Narjadin noted that the biggest challenge is competition with the increase in the number of players coupled with rising construction costs which may put profit margins under more pressure. Adding to the challenge is the cost incurred in hiring foreign labour.

“Property developers had to turn to foreign labour as there is a shortage of locals who are keen to work in the construction industry. Turning to hiring skilled foreign workers is not easy too as it is costly and in short supply. The policy on hiring foreign workers for the construction industry with its increasing restriction and higher levy makes it even more challenging and has contributed to the higher construction cost experienced by property developers,” he said.

“Reviewing this policy will greatly help to ease the supply and mitigate the rise in construction cost, resulting in more cost-friendly buildings and which will ultimately benefit the end-buyers and boost growth in both the industrial and residential sectors,” he added.
 

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