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Industrial occupancy rate at near seven-year low: JTC

SINGAPORE — The occupancy rate of industrial space in the Republic has fallen to its lowest level in almost seven years after the Government increased the land supply for such use in recent years, and this has in turn helped to keep rentals and prices in check, industrial landlord and developer JTC said yesterday.

SINGAPORE — The occupancy rate of industrial space in the Republic has fallen to its lowest level in almost seven years after the Government increased the land supply for such use in recent years, and this has in turn helped to keep rentals and prices in check, industrial landlord and developer JTC said yesterday.

“With more industrial land and space being released, prices and rentals of industrial space continued to moderate in the second quarter of 2014, and occupancy rates of the overall industrial property market continued to fall,” the JTC said in its Quarterly Market Report.

The occupancy rate of the overall industrial property market fell by 0.9 percentage points on a quarterly basis to 90.7 per cent, the lowest since late 2007, the report showed. On a year-on-year basis, the occupancy rate declined 1.7 percentage points.

Overall industrial rents fell 0.1 per cent during the April-to-June period from the previous quarter, compared with the 0.4 per cent rise in the previous three months. On a year-on-year basis, rentals rose 5 per cent in the second quarter, moderating from the average increase of 10.2 per cent per year over the past four years.

Prices of industrial space also continued to stabilise in the second quarter, rising 0.7 per cent from the previous three months, much slower than the 3.8 per cent rise in the first quarter. The on-year rise of 3.9 per cent in the April-to-June quarter is also significantly slower than the average 18.8 per cent per year over the last four years.

While the moderation in rental and price increases should come as a relief for businesses reeling from rising costs amid the ongoing economic restructuring process, Mr Victor Tay, chief operating officer of the Singapore Business Federation, said the latest data came against a backdrop of the current “less than optimistic” business environment.

“This seems to correlate with the current state of affairs, with gross domestic product and exports coming in weaker, so sentiment at large is less than optimistic. Businesses are finding it difficult to expand due to factors like shortage of manpower, resulting in some possibly giving up or scaling back industrial space, translating to a decline in occupancy,” he said.

“It is still early days to conclude whether rents and prices have declined. To see a real change in price trends, we’ll have to see consecutive quarters or years of stability,” he added.

JTC said the Government will monitor the market closely and, where necessary, release more land with a range of sizes to suit different industry needs. In the second half of this year, around 1.8 million sq m of industrial space is expected to come on-stream, out of which 400,000 sq m are multiple-user factory space, it said.

And between 2015 and 2017, an average of around 1.6 million sq m of industrial space is expected to come on-stream every year, significantly higher than the past three years’ average annual supply and demand of around 1.3 million sq m and 900,000 sq m, respectively, it added.

Analysts said this supply should continue to keep a lid on prices.

“This bigger stream of supply would help to hamper bids that are too competitive … There would be limited upward pressure on values because (industry players) know there is supply coming in,” said Mr Desmond Sim, head of property firm CBRE Research.

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