TODAY'S HEADLINE

RESALE PRICES OF INDUSTRIAL SPACE ON THE RISE  

There are signs of speculation developing in areas of the industrial property sector, analysts say, but they are divided over whether there is overheating and if the government should step in. A report from consultancy DTZ yesterday showed that resale prices for industrial space continued to rise in the third quarter, while industrial rents held 'rm.

The report showed that resale industrial prices for 'rst'storey conventional industrial space rose 4 per cent in Q3, to $600 per square foot (psf), compared with the previous quarter. This was at the same rate as the previous quarter. For upper'storey industrial space, prices grew 3.5 per cent to $445 psf from the previous quarter, slowing from 4.9 per cent growth in Q2.

Rents for 'rst'storey conventional industrial space were at an average of $2.15 psf per month, while upper'storey rentals averaged $1.75 psf per month, the same levels as Q2. Hi'tech industrial rents edged up 0.07 per cent from the second quarter, to $3 psf per month.

Chua Chor Hoon, head of Asia Paci'c Research at DTZ, said the lack of a seller's stamp duty for commercial properties could be a reason for the increase in speculation, as there is no penalty if buyers sold their units within a short period of  time. There are reasons besides speculation for the upward trend in industrial prices, CBRE said, such as increasing demand for quality space and more MRT stations coming up close to business parks.

In our view, there is certainly a speculative element behind the recent increase in the resale prices of industrial space. According to our channel checks, while more investors are 'ocking towards industrial properties in search of high'yield returns, the bulk of investment is channeled towards factories and manufacturing plants, rather than logistics properties such as warehouses. On this front, industrial REITs such as Mapletree Industrial Trust (Unrated, S$1.44) and Cambridge Industrial Trust (Unrated, S$0.655) could potentially
face greater headwinds in securing attractive sites for future development.

Source: AmFraser