High-spec industrial space has lost its appeal with tenants over the last few months. Some firms have returned to leasing commercial space as office rents have plunged, said Colliers International.
In turn, the move has reduced rents for high-spec space. The average gross rent of high-spec space per month fell 14.1 percent from $3.41 per sq ft at end-March to $2.93 per sq ft at end-September.
According to Colliers, these lower rents signify there is stiff competition among tenants. It also added that some firms had taken advantage of the decline in office rents to move to office premises.
This is a sign of a reversal of the trend which began in 2007. As office rents surged behind a booming economy, more companies moved away from the CBD to a more affordable high-spec industrial space.
However, office rents have dropped amid the economic hold back. The monthly prime office rents hit an average of $7.50 psf in Q3, down by 12.8 percent from last quarter, said CB Richard Ellis in September. They have fallen 53.4 percent from their Q3 peak the previous year.
On top of decreasing demand, a vast supply of high-spec space is anticipated to be released in 2010, which has also contributed to the declining rents, said Colliers.
On the contrary, some warehouses and factories have seen relatively stable rents. According to Colliers, the average monthly gross rent of single-user factories in central Singapore from end-March to end-September remained firm at $1.30 psf, while that of warehouses in eastern Singapore held up at $1.20 psf.
On the positive side, Colliers noticed a pick-up in sales of industrial space, which involved domestic companies, owner-occupiers and private investors.
Although industrial space markets all over the Asia-Pacific seem to be at its lowest point, Colliers has chosen to stay cautious in its outlook.