PDF versionSingapore – Today, the Urban Redevelopment Authority (URA) released property market information on industrial properties in Singapore for the second quarter of 2008.
In 2Q 2008, Singapore industrial property rentals and capital values both grew on the whole, but showed some divergence in their pattern of growth. The rental index for all industrial space climbed by a smaller 2.3%, in contrast to the 5.7% expansion observed in the first quarter of 2008. On the other hand, the corresponding price index expanded by a larger 4.1%, compared to the 3.4% rise in 1Q 2008. This may reflect a preference by industrial space users to buy rather than rent industrial property, as it could, in turn, translate to greater operational flexibility and more stable business continuity for them.
The movement of the rental and price indices for multi-user factory space mirrored that of all industrial space in 2Q 2008, escalating by 3.2% (vis-à-vis 5.1% in 1Q 2008) and 4.7% (vis-à-vis 3.9% in 1Q 2008) respectively. Conversely, the picture for multiple-user warehouse space was less enthused in the second quarter of 2008, as the warehouse rental index remained unchanged, compared to the 6.3% growth in 1Q 2008, while the warehouse price index rose by 1.0% (only a slight change over the 0.9% increase in 1Q 2008). This may indicate more moderate fluctuations being experienced in the warehouse market compared to that for factory space.
Preliminary estimates announced by the Ministry of Trade and Industry on 10 July 2008 showed that real gross domestic product (GDP) rose by an estimated 1.9% year-on-year (yoy) in the second quarter of 2008, down from 6.9% in the preceding quarter. The slowdown chiefly reflected a sharp contraction in biomedical manufacturing output. Nevertheless, excluding the biomedical sciences cluster, industrial production grew moderately.
Occupancy of both factory and warehouse space improved in 2Q 2008. Factory space attained an occupancy rate of 93.1%, the highest achieved since the 93.2% level was witnessed at the end of 1997. Similarly, warehouse space revealed occupancy of 92.0% - the last time such a level was reached was when 92.2% was recorded in 1Q 1997. Despite the more subdued rental and price movements in the warehouse market in 2Q 2008, the robust occupancy therein may point toward closer matching of demand and supply.
Due to a lack of supply of business park space in the second quarter of 2008, its occupancy rate was boosted by 1.7 points to 89.7%. Demand for business park space is projected to remain positive in the next few quarters as tenants continue to look to business park space as more affordable alternatives to office space, such as for their back-end operations.
Notwithstanding concerns regarding inflation, the global credit crunch and recessionary pressures in general, demand for industrial space in Singapore is still expected to stay healthy for the whole of 2008, especially from businesses that are less sensitive to external economic uncertainties, and as long as our country’s sound fundamentals are maintained. For the entire 2008, average industrial property prices are envisaged to grow by 8% to 15% yoy, while average rentals of industrial space are anticipated to increase by 6% to 12% yoy.
Nicholas Mak, Director of Consultancy & Research Department, Knight Frank, +65 6228 6821
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