Business parks here show healthy demand

Source : Today - 9 Oct 2008

EVEN with the manufacturing part of the economy facing difficulties, demand for industrial space - particularly in business parks - is apparently still healthy, according to experts from the property firm DTZ.

By contrast, the market for office space is softening, the firm says.

Executive director Ms Chua Wei Lin said: “Demand for private industrial properties - in particular, hi-tech and business park space - is expected to be firm for the rest of 2008, supported by a spill-over of users from the office sector.”

But, in view of an increasing supply of space and a softer economic outlook, industrial space rentals are generally expected to experience a decline next year, she said.

For offices, the downturn is coming earlier, said Ms Chua’s fellow executive director,Ms Cheng Siow Ying. She said: “Office occupiers have become more cautious, with many adopting a wait-and-see approach. While negotiations for space are still ongoing, they are taking longer to conclude.

“Many occupiers have shelved expansion plans for the moment amid economic uncertainties, and (are instead) choosing to renew leases at existing premises to avoid relocation costs. Many also continued to relocate to more cost-effective, decentralised offices and converted state properties, while those that qualify for hi-tech industrial and business parks are relocating there.”

Average office rents peaked in the third quarter of the year, with no rental growth during the quarter. Although most landlords are maintaining their asking gross rents, they are now more flexible in their lease packaging, resulting in lower effective rental rates, DTZ research shows.

The pace of office users relocating to business parks accelerated, as more companies - deterred by high office rentals - sought premises with lower occupation costs. Occupancy of business parks averaged 92.5 per cent.

Most of the planned new space is built-to-suit buildings already committed to financial institutions, such as DBS and Citibank. Other multiple-tenanted business parks developments are also attracting strong interest; for example, Mapletree Business City in Pasir Panjang, which has one of its three business parks towers already pre-committed.