I N D E P E N D E N T M A R K E T S T U D Y ( S I N G A P O R E )
By DTZ Debenham Tie Leung (SEA) Pte Ltd
Potential Supply
DTZ estimates that there is approximately 2.2 million sqm of
private factory space in the pipeline from 2015 to 2018. This is
about 8% of the existing stock in 2014. About 83% will complete
in 2015 (0.9 million sqm) and 2016 (0.9 million sqm). Following
the trend over the past two years, most (97%) of the multiple-
user factories completing in 2015 are strata-titled for sale. These
strata-titled industrial properties, upon completion, are expected
to pose more competition to multiple-user factories that cater to
small end-users. On the other hand, potential supply in the high-
specs industrial segment is expected to be relatively tight, as it
accounts for about 6% to 10% of the overall pipeline supply of
private single-user and multiple factories.
Demand and Occupancy
17
Notwithstanding the moderate economic performance in
2014, annual net demand for private multiple-user factories
reached 332,000 sqm in 2014, a significant pick-up from
the 126,000 sqm in 2013 (Figure 4.2). Leasing activity was
mainly from high-tech companies, particularly those in the
biotechnology, biomedical and med-tech industries. These
clusters, earmarked by the government as future growth
industries, have been expanding significantly in Singapore,
reflecting the country’s strong position as a global-Asia tech
hub and its comprehensive end-to-end innovation eco-system.
Similar to the business park sector, demand for high-specs industrial
space was supported by cost-conscious tenants relocating from
more costly office space. For instance, Roche Diagnostics and Intel
relocated from their previous premises at Central Plaza and Haw Par
Centre respectively to Aperia. Aperia has also attracted many other
established MNCs such as Audi, Cardinal Health and McDonald’s.
Figure 4.2: Net Supply, Net Demand and Occupancy
(Private Multiple-user Factory)
Source: JTC, DTZ Consulting & Research, March 2015
Although demand was significant (332,000 sqm) in 2014, net
supply (496,000 sqm) was substantial and exceeded net demand.
Due to the ample new supply, occupancy for private multiple-user
factory space fell by 1.2%-points from 87.1% in 2013 to 86.0%
in 2014, the third consecutive decline since 2012. In view of the
curtailed demand from large end-users, especially in labour-intensive
industries, some industrial landlords, particularly REITs, have been
converting their single-user assets to multi-tenanted buildings. This
also impacted on multiple-user factory occupancy in 2014.
A large proportion of net supply was accounted by strata-titled
factory space. While many of these developments incorporate
modern features such as office-like facades, arrival lobbies and
landscaping, their units are small and lack specifications for
industrial use. These units mostly are not suited for large industrial
MNCs, which typically require large contiguous floor plates and
high specifications. Coupled with the strict user-eligibility criteria,
leasing demand for strata-titled factory units was lacklustre. As a
result, this affected overall multiple-user factory occupancy as many
of the strata-titled factory units remained vacant despite being sold.
Rents
18
The declining occupancy for multiple-user factories resulting from
the excess supply in 2014 weighed on light industrial rentals.
Many of the strata-titled factories remained vacant despite
being sold. With industrialists continuing to face challenging
operating conditions, many remained cost-sensitive. Coupled
with the increased competition for tenants among landlords,
private multiple-user factory rents fell by 0.7% in 2014 after its
3.5% increase in 2013, according to JTC’s multiple-user factory
rental index. Meanwhile, light industrial monthly rents remained
stagnant at $1.98 per sq ft ($21 per sqm) in 2014 (Figure 4.3).
Figure 4.3: Rental Trend
(Private Light and High-Specs Industrial)
Source: URA, JTC, DTZ Consulting & Research, March 2015
900,000
92%
120
2.80
80
2.40
40
2.00
100
2.60
60
2.20
20
1.80
1.60
1.40
1.20
0
1.00
800,000
700,000
90%
600,000
88%
500,000
86%
400,000
84%
300,000
82%
200,000
80%
100,000
78%
0
76%
sqm
$ per sq per month
Index (Base – Q4 2012)
2004
2004
2008
2008
2006
2006
2010
2010
2012
2012
2005
2005
2009
2009
2007
2007
2011
2011
2013
2013
2015F
2014
2014
2016F
2017F
2018F
Net Supply (LHS)
Net Demand (LHS)
Occupancy (RHS)
17 Demand and occupancy data for the high-spec and light industrial segments is unavailable. The demand and occupancy trends for private multiple-user factory
are used as a proxy.
18 The 75th percentile monthly rentals for multiple-user factory space were used as a proxy for high-specs industrial rental trends, while the median rentals for
multiple-user factory space were used as a proxy for light industrial rental trends.
Median Multiple-User Factory Rents (Light Industrial) (LHS)
75th Percentile Multiple-User Factory Rents (Hi-Specs Industrial) (LHS)
Private Multiple-user Factory Rental Index (RHS)
Average Annual Net Supply (2004 to 2013): 286,600 sqm
Average Annual Net Demand (2004 to 2013): 281,000 sqm
Average Annual
Completions (2015 to
2018): 247,900 sqm
ASCENDAS REAL ESTATE INVESTMENT TRUST ANNUAL REPORT 2014/15
