Friday, December 30, 2011

Increase in industrial land supply expected to soften prices, rents

Business Times: Fri, Dec 30

THE planned increase in land supply under the Industrial Government Land Sales (GLS) Programme in H1 2012 will help soften industrial property prices and rents to a level within reach of genuine end users, say some property consultants.


Another change announced by the Ministry of Trade and Industry (MTI) yesterday that will be a boon to industrialists who have been priced out of the market will be the new conditions on strata subdivision of projects on sites sold through the MTI's Industrial GLS Programme from next year. This will put a lid on the proliferation of small industrial units that have been chased by property speculators and investors, driving up industrial property values in the process. Developers of such projects have also, in turn, pushed up the price of industrial land at state tenders.


Developers who have been building strata industrial projects will now take a step back and see what's happening, said Knight Frank senior director (industrial) Lim Kien Kim.


This is likely to tame tender prices for industrial land in the GLS Programme which, as DTZ South-east Asia chief operating officer Ong Choon Fah noted, have roughly doubled generally in the past year.


Another big plus for industrialists will be the 18 small plots located in the Tuas View Extension that are being offered on short tenure of 19 years. The plots are small (mostly up to a hectare each) and have a 1.0 plot ratio (ratio of maximum gross floor area to land area), which suggests that they will be turned into landed factories.


The short tenure is likely to push developers out of tenders for such sites as it may be difficult for them to develop factories on such sites and sell them for a profit. For one thing, it will not be easy for buyers to get a loan on such short-tenure property. 'This will mean less competition from developers bidding for sites and give end users a chance to build their own premises at a reasonable (cost),' said Mr Lim.


SLP International managing director Peter Ow noted: 'Such small sites of less than a hectare are not easy for industrialists to find and develop on their own.'


Giving his take, Colliers International director (industrial) Tan Boon Leong said: 'MTI's announcement is clearly aimed at providing more avenues for genuine industrial end-users to participate in the market.'


Mrs Ong noted that there has been concern that the recently introduced additional buyer's stamp duty on residential property purchases may divert investment interest to non-residential assets such as industrial. 'Introduction of the conditions on sale and minimum strata size are probably a pre-emptive (measure).'


The conditions will likely lead to a 'better reflection of industrial land prices, and ensure that there is sufficient supply to meet the needs of our industrialists, be they SMEs (looking to rent or purchase) or MNCs', she added.

Source: Business Times © Singapore Press Holdings Ltd

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