Industrial briefing. Singapore. November 12, Savills Research

Transcription

1 Singapore November 12, 29 Whilst there are signs that the economy is slowly emerging from its trough, industrial rents and prices remain weak on subdued external demand. After three negative quarters, the economy grew by.8 per cent year-on-year, largely due to a revival in the manufacturing sector. Vacancy rate of factory space rose to 8.1 per cent from 7.8 per cent last quarter while that of warehouse declined from 9. per cent last quarter to 8.2 per cent in Q3/29. About 24 million sq.ft. of new industrial space will be added over the next 15 months. Changi Business Park saw two major developments completed in the reviewed quarter - DBS Asia Hub and Standard Changi. Industrial rents and prices continued to decline but at a slower pace than last quarter by 3.1 per cent and 2.1 per cent quarter-on-quarter respectively. Image: Automobile Megamart located at the junction of Eunos Link and Ubi Avenue 2 Savills Research

2 Industrial Sales Activity The total sales volume surged from 2 sales transactions in Q2/29 to 324 in the reviewed quarter. This represented an increase of 62 per cent quarter-on-quarter. Nonetheless, total sales volume in the fi rst three quarters at 619 was the lowest level since 25. The highest sales volume among the strata industrial developments was TradeHub 21 located along Boon Lay Way where 26 units exchanged hands at an average price of about S$29 per sq.ft. This was followed by Innovation Place and Vertex (22 units each) and Northlink Building and Ubi Techpark (12 units each). Despite the higher sales volume, total transaction value fell by S$184 million from Q2/29 to S$411 million in Q3/29. Year-to-date, transaction value totalled S$1.13 billion, just a third of last year s total of S$3.53 billion. Sales Transactions & Values, 2 Q3/29 No. of Transactions 1,8 1,6 1,4 1, , On the investment sales front, there was no activity from the Real Estate Investment Trusts (REITs) in the reviewed quarter. On the other hand, A-REIT took advantage of the improved market sentiment to launch a private placement of 185 million shares to institutional and other investors to raise about S$3 million. Part of the proceeds were understood to be used to fund the development of a high-tech industrial facility for Singtel, with the remainder to be used to fund potential acquisitions. Vacancy Rate Q1 Q2 Q3 Q4 (LHS) Total Value of Transactions (RHS) The vacancy rate of factory space in Q3 rose to 8.1 per cent, up from 7.8 per cent in the last quarter. This was due to net supply outstripping net demand by some 1.1 million sq.ft. Business park space saw the sharpest spike in vacancy, up from 9.7 per cent last quarter to 15.8 per cent. This may be a result of more new business park developments being completed in the reviewed quarter. 286 S$ million 4, 3,5 3, 2,5 2, 1,5 1, 5 Net Demand, Net Supply, Vacancy Rate for Factory Space, 2 Q3/29 ' sq.ft. 5, 4, 3, 2, 1, -1, Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q In contrast, the vacancy rate of warehouse space declined to 8.2 per cent from 9. per cent last quarter as net demand for warehouse space posted a positive net absorption of 71, sq.ft. Net Demand, Net Supply, Vacancy Rate for Warehouse Space, 2 Q3/29 ' sq.ft. 2, 1,5 1, 5-5 Future Supply Net Demand (LHS) Net Supply (LHS) Vacancy Rate (RHS) Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q Net Demand (LHS) Net Supply (LHS) Vacancy Rate (RHS) -1, % Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q In the reviewed quarter, the most notable developments completed included DBS Asia Hub (329,375 sq.ft.) and Standard Changi (234,653 sq.ft.) located along Changi Business Park Crescent, Admirax (469,36 sq.ft.) located along Admiralty Street and AMK (693,195 sq.ft.) located along Ang Mo Kio Avenue 5. The sizeable amount of 24 million sq.ft. of new industrial space due to come on stream over the next 15 months is likely to exert further downward pressure on industrial rents and prices. 14% 12% 1% 8% 6% 4% 2% % 18% 16% 14% 12% 1% 8% 6% 4% 2% Over 2 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. 2

3 Future Industrial Supply, 29 - >213 Factory Warehouse million sq.ft > Rents & Prices The URA s rental index for industrial space continued to decline by 3.1 per cent quarter-on-quarter in Q3/29, albeit at a slower pace than last quarter. The price index of industrial space also fell by a smaller margin of 2.1 per cent quarter-on-quarter compared with a 4.5 per cent decline last quarter. On a year-on-year basis, the price index registered a drop of 21.4 per cent. The average monthly rents of Savills basket of prime fl atted factories remained unchanged at S$1.3 to S$1.6 per sq.ft. while those for prime warehouses in central Singapore inched lower to S$1.3 to S$1.6 per sq.ft. from S$1.4 to S$1.7 per sq.ft. Industrial Rental and Price Change, 2 Q3/29 15% 1% 5% % -5% -1% Rent Prices -15% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q Economic Overview Singapore s.8 per cent year-on-year economic expansion in Q3/29, the fi rst after three straight negative quarters, was largely due to the continued revival of the manufacturing sector in this reviewed quarter. Continued expansion in biomedical and electronic manufacturing output as well as improvement in the trade-related and tourism sectors helped to spur economic growth. This is the second straight quarterly growth this year. The September reading of the Singapore Purchasing Managers Index (PMI) showed a decline of 3.8 points over last month to 5.6. Nevertheless, this indicated that the manufacturing sector had expanded for the 5th straight month after 8 months of contraction. While these are encouraging signs that the manufacturing sector is on the mend, demand for Singapore industrial space is not likely to see any short term spike as external export demand remains relatively subdued. Outlook According to MTI, Singapore s economy is expected to contract by between 2. and 2.5 per cent this year, up from its previous forecast of between -4. and -6. per cent. While economic conditions have continued to improve from Q2, there is still much uncertainty overhanging the health of the global economy, with final demand in Singapore s key export markets yet to recover convincingly. As a result, demand for industrial space is likely to remain subdued. Against looming supply of over 24 million sq.ft. of industrial space, prices and rents for factory and warehouse space are expected to remain soft over the coming quarters. Changi Business Park now boasts fi nancial institutions like DBS, Standard Chartered Bank and Citigroup as tenants. With the completion of DBS Asia Hub and Standard Changi in Changi Business Park this quarter, most of the major financial institutions have now relocated their back-ofhouse operations to high-tech industrial buildings. However, the relocation of offi ce users to high-tech industrial space is slowing down. Savills notes that offi ce users are now less inclined to relocate to high-tech industrial space as asking rents for offi ces in the CBD have fallen signifi cantly and offi ce landlords are keen to retain their existing tenants by offering extras such as rental concessions and fi tting out costs. Consequently, average high-tech industrial rents inched down from S$2.4 to S$3.2 per sq.ft. last quarter to S$2.2 to S$2.9 per sq.ft. in Q3/29. Over 2 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. 3

4 For further information, please contact: singapore Michael Ng Managing industrial, singapore Dominic Peters investment sales, singapore Steven Ming research & consultancy, singapore Jessie Yeo Executive address Savills (Singapore) Pte Ltd. 2 Shenton Way #17-1 SGX Centre 1 Singapore 6884 T: F: corporate website commercial, singapore June Chua jchua@savills.com.sg research & consultancy, asia pacific Simon Smith Senior ssmith@savills.com.hk This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particulars do not constitute, nor constitute part of, an offer or contract; interested parties should not rely on the statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy. No person in the employment of the agent or the agent's principal has any authority to make any representations or warranties whatsoever in relation to these particulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills. Savills (Hong Kong) Limited. 29. Savills Research MICA(P) No. 141 / 11 / 28 Company Reg No D

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