Record Year For The Industrial Property Market

Source : The Business Times, Thursday, December 20, 2007

Rents and occupancy levels improve for all industrial space in 2007: CBRE report

THIS has been a record-breaking year for the industrial property market with rents and occupancy levels improving for all industrial space this year, CB Richard Ellis (CBRE) says in its latest report on the sector.

The increases reflect continued strong demand, the property firm said yesterday. The year also saw the award of several business park sites, the launch of a fourth industrial real estate investment trust (Reit) and 10 industrial sites awarded to developers and manufacturers. In addition, Ascendas also announced that its Singapore Science Park will undergo a $400 million renovation.

In the fourth quarter, average monthly rent for high-tech space rose 7.8 per cent quarter-on-quarter and 37.5 per cent year-on-year to $2.75 per square foot (psf). The rental surge can be attributed to increased demand from traditional office tenants seeking high-tech space as an alternative because of the steep rise in office rents, said CBRE.

The average occupancy rate for high-tech space has risen to 92.8 per cent now, from 91.1 per cent at the end of last year. The average occupancy rate for business parks has grown by 5.0 percentage points year-on-year to 89.0 per cent, CBRE’s data showed.

‘The increase in rents and occupancy rates for high-tech space is likely to continue as large injections of office and high-tech stock are not expected until after 2009,’ said Bernard Goh, CBRE’s director for industrial and logistic services.
Likewise, average monthly rents for factory space also increased over the year - albeit at a slower pace. Rents for factories rose five cents psf every quarter for the entire 2007. This was an improvement over 2006 when rents remained at $1.25 psf for ground floor units and $1.00 psf for upper floor units throughout the year. Occupancy rates also improved gradually during the year.

Rentals and occupancy rates for warehouse space also increased during the year.

‘The increase in rent and occupancy rates for factories and warehouses was due to better economic conditions in Singapore and Asia,’ Mr Goh said. Many international companies have recently turned their sights to this region on the back of Asia’s growth, and Singapore’s strategic location and pro-business environment have made the city-state a choice location for many companies, he said.

Rents and occupancy rates for all industrial space - especially high-tech buildings and business & science parks - are expected to continue growing in 2008, CBRE said. ‘The effects of the recent US sub-prime woes might impact demand for industrial space in the short-medium term but overall, manufacturers are expected to continue investing in Singapore and so demand for industrial space will still remain healthy,’ the report says.