Crunch bites, more quit JTC facilities

Source : Business Times - 4 Nov 2008

Many pull out of factories as they merge operations

The economic slowdown is making its mark again, this time in numbers from JTC Corporation’s quarterly facilities report for Q3 2008.

More manufacturing and related businesses returned industrial space to JTC as many merged their operations. Termination at ready-built facilities (RBF) in Q3 2008 jumped 25.7 per cent quarter-on-quarter and a sharper 45 per cent year-on-year.

Flatted factories, standard factories and business parks saw termination hit 30,300 sq m. The services and precision engineering sectors were responsible for most of the pullback, each accounting for 30 per cent of termination.

Electronics was the third largest sector behind the termination, making up another 18 per cent.

Most of the termination occurred because businesses were consolidating their operations. Around 67 per cent of termination in Q3 was the result of this - 20 percentage points higher compared with the preceding quarter.

Industries also cited poor business as a reason, which accounted for around 12 per cent of termination. In sharp contrast, no termination was caused by the same factor in Q2.

Despite the higher termination level, ‘the occupancy rate for RBF was sustained at a very healthy level of 95.6 per cent for this quarter,’ said JTC in its report. This is a slight improvement over Q2’s occupancy rate of 95.5 per cent.

The amount of RBF space which JTC leased or rented to industries also dropped in Q3. Gross allocation fell 68.6 per cent from the previous quarter to 29,800 sq m.

Lower gross allocation and higher termination shaved the net allocation of RBF from 70,800 sq m in Q2 to -500 sq m in Q3. This is the first negative net allocation figure since 2004. (Net allocation is defined as gross allocation less termination of land or space.)

Having sold $1.7 billion worth of high-rise ready- built properties to Mapletree Investments on July 1, JTC’s total RBF space in Q3 was 3.4 million sq m, down from 4.5 million sq m before the divestment.

JTC’s prepared industrial land (PIL) space appeared more resilient against the cooling economy. Termination actually dropped 26.2 per cent to 22.2 ha in Q3. Services, general manufacturing and electronics were the top three sectors behind the terminations.

Nonetheless, gross allocation for PIL did fall 11.5 per cent to 56.7 ha in Q3. The manufacturing sector only took up 47 per cent of the allocated land in Q3, with manufacturing-related and supporting sectors making up the remaining 53 per cent.

Lower termination helped mitigate the effects of lower gross allocation, allowing Q3 net allocation for PIL to remain relatively stable at 34.5 ha compared with the previous quarter.