Flatted Factory Rents Boosted By Office Space Crunch Too

Source : The Business Times, April 2, 2008

BUSINESS park space is not the only industrial sector benefiting from the spillover effects of the office space crunch.

According to a report by Colliers International, the light industrial factory segment is also beginning to experience some of this spillover effect.

Monthly gross rents of prime conventional flatted factories in central Singapore for Q108 increased by 11.8 per cent for ground floor space and 10.6 per cent for upper floor space on a quarter-on-quarter (QoQ) basis to $2.36 psf and $1.77 psf respectively.

The QoQ increase in rents for Q108 were also higher than the increases in Q407 which saw ground floor space and upper floor space both increase by 6 per cent. Colliers director (industrial sales and leasing) Tan Boon Leong said demand from ‘qualifying office users’ had resulted in the increased popularity of conventional flatted factories in the Bukit Merah/Alexandra Road locality. He added: ‘The proximity to the CBD has made these industrial properties an ideal alternative for qualifying office users, especially those who do not require exceptionally high building specifications, and are looking for cheaper business premises.’

Colliers believes some of these users are likely to come from the service industries including design agencies, IT-related support firms, and engineering firms. Mr Tan said that demand for such space was so high that newer and more modern flatted factories such as Cendex Centre and E-Centre commanded average monthly gross rents of $3.20-$4 psf in Q108.

Cendex Centre, which is on Lower Delta Road, also saw units selling at an average of $610 psf, with the highest price of $680 psf achieved in February.

As such, Colliers projects rents for conventional factories to increase by up to 15 per cent for the rest of 2008. High-specification industrial space and business park space will, however, remain star performers in the industrial sector with rents expected to rise up to 20 per cent for the rest of the year due to the spillover demand from the office sector.

Average monthly gross rents for high-specification industrial space rose 16 per cent in the quarter to $3.98 psf with popular space in Alexandra Road and Changi Business Park commanding average monthly gross rentals of around $4.80 psf.

Strong demand for logistics space from third party logistics service providers and industrialists also saw average monthly gross rents of prime warehouse space rise 13 per cent for ground floor space and 7.5 per cent for upper floor space in the quarter to $2.35 psf and $1.72 psf respectively.