Negative take-up of industrial space

Source : Straits Times - 12 Feb 2009

LANDLORD JTC Corp was hit by a sharp fall in the take-up of its industrial space during a tough fourth quarter.

In ready-built factory space, lease terminations of 21,200sqm exceeded the 20,000 sq m of new space leased during the quarter, resulting in a negative net take-up of 1,200 sq m.

This was a marked deterioration on the third quarter, when JTC reported the first negative net take-up for its ready-built factories since 2004 of 500 sq m.

In prepared industrial land, the company remained in positive territory with a net take-up of 17.5ha. But the figure is less than half that seen in the third quarter.

Total terminations of its ready-built facilities reached a five-year high during the whole of last year, rising to 108,000 sq m. Fewer tenants terminated their ready-built factory space in the fourth quarter, as compared with the third.

Some 323 firms ended their leases, with the bulk of them being in multi-storey factories, up from 318 firms in 2007.

Occupancy in this segment was at a 10-year high of 96.8 per cent last year. For the full year, take-up of ready-built facilities rose 4 per cent on the previous year.

Take-up of prepared land slumped 41 per cent to 200.9ha. In all, 62 firms terminated leases, a rise on the 53 firms in 2007.

Deteriorating market conditions forced JTC to last month grant 7,700 customers a 15 per cent rent rebate for one year, starting Jan 1. The move came after property experts predicted that the industrial sector would be further hit by the worsening economic climate.

Companies are looking to renegotiate lower rents and move out or sub-let space, said Colliers International’s director of industrial sales Tan Boon Leong.

He expects the vacancy rate in the industrial sector to rise once office rents fall nearer the rent of high-tech space - now hovering around $3.50 to $4.50 per sq ft.