Hi-tech rents, occupancy rates up

Source : Business Times - 3 Jul 2008

Insufficient and expensive offices drive tenants to business parks, leading to 6.8% rise q-o-q

RENTS and occupancy rates for hi-tech and business park space were lifted in the second quarter of this year by spillover demand for office space, property consultants say. And rents for factories and warehouses have edged up too.

According to CB Richard Ellis (CBRE), the average island-wide hi-tech monthly rent rose 6.8 per cent quarter-on-quarter to $3.15 per sq ft (psf) in Q2. Year-on-year, the increase was 34 per cent.

Insufficient and increasingly expensive office space is driving tenants to hi-tech space or business parks, CBRE said in a statement yesterday.

Jones Lang LaSalle (JLL) also says that companies are relocating backroom operations to hi-tech space. Its latest figures show that the average island-wide hi-tech rent rose 2.4 per cent quarter-on-quarter to $4.25 psf per month in Q2. Compared with a year earlier, the increase was 63.5 per cent.

While figures from both property consultants indicate rising rents for hi-tech space, the degree of increase differs.

‘The disparity is a result of differences in the basket of properties that research houses use to track the market,’ said JLL’s head of research (South-east Asia) Chua Yang Liang. ‘This difference is more pronounced in periods when segments of the market respond differently to external stimulus.’

CBRE says that for business parks, the average occupancy rate was 88 per cent at end-March and could have exceeded 90 per cent by the end of Q2. This would be a new peak.

The firm’s director of industrial and logistics services, Bernard Goh, says that rents at business parks also rose in Q2.

More business park space will be coming on stream. According to CBRE, Biopolis Phase III will be completed in Q4 2009. And JTC Corporation launched a tender for Plot 61 in Changi Business Park last month.

For factory space, the average monthly rent for a ground-floor unit rose 3.3 per cent to $1.55 psf in Q2, says CBRE.

The average capital value of ground-floor units in 60-year leasehold strata-titled factories edged up about 3 per cent quarter-on-quarter to $302 psf.

Ground-floor units in warehouses registered a 3.3 per cent increase in average monthly rent to $1.55 psf in Q2.

Rising raw material costs, a stronger Singapore dollar and weakening demand for exports have made manufacturers cautious about their outlook, dampening demand for factories and warehouses, says CBRE.

‘However, the government has reiterated that the manufacturing sector will remain important to Singapore’s economy,’ it says. ‘As such, manufacturers are still encouraged to set up their facilities on the island, and demand for industrial space is expected to remain healthy.’

CBRE points out that recently there have been few purchases by industrial REITs, as funding availability has dropped. According to Mr Goh: ‘The limited credit supply is likely to continue to curtail the ability of the REIT players to expand their respective portfolios, but on the whole, industrial properties continue to remain an attractive asset class for institutional investors.’