Average rents for high-specs industrial space down to S$3.50 psf per month

REITS on hunt for accretive purchases amid low interest rates.

Here's from Colliers International:

On top of slowing occupier demand from industrialists as they cut back on expansion and capital investment plans, the high-specs industrial sector also suffered from easing spill-over demand from the office sector in line with its falling rents and rising stock of suburban office space.

Coupled with ample supply in the pipeline, the rents for high-specs industrial space stood at S$3.50 per sq ft per month, based on a new basket of high-specs spaces tracked. However, in the prime central locality, some high-specs industrial space could still command a strong rent of about S$3.80 to S$4.00 per sq ft while business parks could achieve S$4.50 to S$5.00 per sq ft.

Notwithstanding the global uncertainties and the near-term pressure on rents, REITs took advantage of the low interest rate environment to secure yield accretive purchases. For example, in February 2012, Ascendas REIT bought four high-specs buildings located in the Singapore Science Park – Cintech I, II, III and IV – for a collective sum of S$183.00 million. This comes shortly after their announcement in December 2011 that they have acquired two properties, namely Corporation Place at 2 Corporation Road and 3 Changi Business Park Vista for a combined S$179 million.

Although overriding caution in the industrial property sector is expected to weigh on current market sentiments, demand for high-specs industrial space could be shored up by, among other factors, expansion in research and development functions as well as the setting up of new high-value information and communication technology, bio-medical and digital media outfits. This should help to limit the dip in overall high-specs industrial rents to 3% for the whole of 2012.

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