The Straits Times
Saturday, Nov 03, 2012
Woodlands, Bedok and Geylang have emerged as hot spots for industrial property investors this year, as the red-hot sector draws growing interest.
Developers sold a total of 435 new industrial units in the third quarter, with 37 per cent of sales in the Geylang and Kallang planning areas, an analysis of caveats lodged with the Urban Redevelopment Authority (URA) has found.
Projects in these areas include AZ @ Paya Lebar, Oxley Bizhub and CT Hub 2.
Industrial prices have now charged up by more than 60 per cent in under two years, new figures out earlier this week showed.
Sales volumes have also been climbing, with 2,894 transactions in the first 10 months of the year. This is up 14 per cent from the same period last year, and is 28 per cent more than in 2010.
This sharp increase has prompted a property expert to call for more detailed data to properly understand the phenomenon – especially as government cooling measures may in the offing.
Savills Singapore research head Alan Cheong suggests a separate index be compiled for each industrial property segment – freehold and 30-year, 60-year and 99-year leases. This would give the market a better idea of price movements, he said.
Lumping all transactions together might skew data for some quarters when a lot of high-priced freehold units, for instance, happen to be sold, he said.
URA data out on Monday showed that industrial property prices surged 8.8 per cent in the three months to Sept30.
This took price gains to a whopping 27 per cent in the first nine months of the year. Last year, they surged 27 per cent.
A growing number of older industrial units at projects like Eunos Techpark and Tan Boon Liat Building have eclipsed the $1,000 per sq ft (psf) mark, costing more than many homes in the suburban areas. Meanwhile, new projects like Apex @ Henderson in the Bukit Merah area, Oxley Bizhub in Ubi Road, and CT Hub 2 in Lavender Street have continued to enjoy keen third-quarter sales.
The highest psf price for a new unit sold in the three months to September was a 3,035 sq ft first-floor factory space that sold for $3.95 million in August at the freehold Apex @ Henderson. This works out to $1,300 psf.
For the year, freehold project AZ @ Paya Lebar topped the price table with a sale at $2,100 psf in June for a 1,098 sq ft unit.
Experts say while prices have generally climbed across the board, surging industrial prices are partly due to new high-priced launches, some of which are less common freehold developments. As benchmark prices are attained, this pulls up the values of nearby resale units, they add.
A Credit Suisse report warned that with prices and rents at 10-year record highs, there are “potential downside risks” given the moderating economic growth outlook and Singapore’s high exposure to the United States and European economies.
The Trade and Industry Minister reiterated in April that the Government will ensure there are sufficient measures to keep industrial space affordable.
“We expect industrial rents and capital values to moderate from here on due to increased potential policy headwinds and Singapore’s high exposure to the dogged uncertainties in the US and (European) economies,” the Credit Suisse report added.
You can basically divide the market of industrial properties into two categories, freehold and leasehold, and it seems the freehold segment is running way ahead and bringing the costs of leasehold along with it, which is artificial, therefore to stop the rise, double of the supply of freehold industrial land needs to be introduced to stamp the rise, it will only for a quarter period, it should do the trick and thereafter moderate with a fall in leasehold prices, I suspect many foreign companies are setting shop in singapore, a hot inflow of funds that is ramping everything up in the short term.
– Contributed by Oogle.