Published 5 April 2011
The Business Times
By Kalpana Rashiwala
Strong demand reflects investors switching from residential sector
CAPITAL values of strata-titled industrial properties continued to appreciate in the first quarter of this year as investors sought refuge in the property segment not affected by curbs imposed on residential properties.
This is on the back of strong demand for such properties last year. CB Richard Ellis said yesterday that in Q1 this year, the average capital values for 60-year leasehold strata-titled factory space increased by about 5 per cent quarter on quarter to $289 per square foot for ground floor units and $213 psf for upper-floor units.
Over the same period, average capital values of freehold strata-titled warehouse space also appreciated around 5 per cent to $449 psf for ground floor units and $392 psf for upper-floor units. ‘This reflects a healthy level of interest from investors who might normally be more active in the residential market,’ said CBRE.
The number of caveats lodged for the purchase of strata-titled factory units surged 76.3 per cent to 1,849 last year and the number of caveats for strata-titled warehouses too more than doubled from 45 in 2009 to 128 last year, noted CB Richard Ellis.
For the first quarter of this year, the 314 caveats for strata factories reflect a 30.8 per cent decline from the 454 caveats lodged in the preceding quarter, as well as a 19.9 per cent drop from Q1 2010; however, CBRE said more caveats for the first quarter of 2011 are expected to be lodged later. There were 26 deals for strata warehouses in January to March 2011, unchanged from Q4 last year and up marginally from 28 transactions in Q1 last year.
CBRE’s director of industrial and logistics services Bernard Goh said: ‘It was observed that capital values for industrial properties were growing at a faster pace than rental values. This could be because some investors who were priced out of the residential sector invested in industrial properties instead.
The three rounds of measures imposed on the residential market since October 2009 could also have caused some residential investors to turn to the industrial market, which does not have such stringent restrictions. This in turn helped boost demand for strata-titled industrial units.’
The average monthly rental for hi-tech space rose at a more modest pace of 1.9 per cent quarter on quarter to $2.65 psf in Q1 2011, after increasing 5.8 per cent quarter on quarter in Q4 2010.
‘The more moderate pace of growth is in tandem with the slowdown in the pace of rental growth for office space,’ CBRE said.
The average monthly rental for factory units rose 5 cents psf quarter on quarter to $1.75 psf and $1.40 psf for ground and upper-floor units respectively in Q1.
The average monthly rental for warehouses too posted q-on-q increases of 3.1 per cent to $1.65 psf for ground floor units and 8 per cent to $1.35 psf for upper-floor units.
Mr Goh said the outlook for the industrial property sector is still optimistic with demand for industrial space remaining healthy. Hence, rents are expected to continue to climb upwards gradually, he added.