Investors more cautious in buying industrial spaces

Blame it on URA's efforts to clamp down on the unauthorised use of industrial space.

But according to Colliers International, unlike 1Q 2012, during which the quarter saw a string of new project launches, there were only two new industrial projects launched in 2Q 2012. Both projects enjoyed good take-up rates, which demonstrate the sustained level of buying interest in industrial properties.

More than 70 per cent of the 72 units in M38@Jalan Pemimpim in the Bishan/Marymount locality were sold at more than S$800 per sq ft (inclusive of void area). Meanwhile, some 80 per cent of the 120 units released in the 360-unit Synergy@KB in the Kaki Bukit area were sold at prices starting from S$335 per sq ft.

However, it was observed that investors exercised more caution in evaluating their purchase decisions, in light of the recent efforts by the Urban Redevelopment Authority to clamp down on the unauthorised use of industrial space.

Mr Tan Boon Leong, Executive Director of Industrial Services at Colliers International, adds, “On the back of a low interest rate environment and healthy demand, the buoyant sales market can also be attributed to the good design specifications and facilities provided in some of these new industrial developments that are recently launched. A design which facilitates practical use of space will always appeal to genuine industrialists.

Additionally, industrial properties have the benefits of a relatively-lower price base, compared to other property types. Hence, although prices of industrial properties are on an upward trend, they are still considered very affordable in absolute price quantum.”

Encouraged by the price levels achieved for newly-launched projects, sellers of existing properties also seek higher prices. Consequently, the average capital values of prime freehold factory space rose in 2Q 2012 – and at a faster pace – for the ninth consecutive quarter.

Average capital values of ground and upper floor space of freehold conventional factory space in 2Q 2012 gained 5.1 per cent and 7.1 per cent to S$665 per sq ft and S$600 per sq ft, respectively. These values are correspondingly 21.4 per cent and 37.3 per cent beyond the recent peaks in 3Q 2008.

The prime ground and upper floor conventional warehouse space also saw the average capital values commanding an average price of S$608 per sq ft and S$533 per sq ft, respectively – a corresponding increase of 4.3 per cent and 5.3 per cent QoQ.