Singapore’s rental rates for warehouses and factories have turned around during the second quarter, rising for the first time since the third quarter of 2008, according to property firm DTZ.
DTZ said the average gross rent for first-storey private conventional industrial space reached $2 psf in the second quarter, an increase of 2.6 percent from the previous quarter, while rent for upper-storey space jumped 3.2 percent to $1.60 psf.
Meanwhile, the average monthly gross rents for upper- and first-storey private industrial spaces dropped 22 percent and 14.9 percent, respectively from their peaks in the third quarter of 2008.
Tan Boon, director of industrial at Colliers International, said rents for warehouses and factories edged up in the second quarter. "This is in line with the increase in factory orders, which in turn led to higher demand for industrial space," he said.
Singapore’s manufacturing output increased 58.6 percent year-on-year in May, which was attributed to higher biomedical output.
Mr. Tan said that the greater demand for industrial space has come primarily from higher-end manufacturers like those in electronics and precision engineering. He believes that warehouse and factory rents will continue to increase in small steps throughout the year, as manufacturers need to utilize excess capacity carried over from the economic downturn.
"Industrial rents are likely to continue to increase but at a slow pace given the stream of about 15 million sq ft of private industrial space in the pipeline over the next one and a half years," said Chua Chor Hoon, South-east Asia research head of DTZ.
The result for hi-tech industrial space is less bright in Q2, as the average monthly gross rent for science parks and other business space in the sector remained at $3.15 psf.
Competition for tenants from commercial space in secondary locations will also be held, said Cheng Siow Ying, DTZ’s executive director for business space. “The narrow rental gap between decentralised offices and hi-tech industrial space provides little impetus for upward movement of hi-tech industrial rents,” he said.