Asia-Pac market for factory space falls

Source : Business Times – 19 May 2009

Industrial property markets in the Asia-Pacific region deteriorated from October 2008 to March 2009 as the global financial crisis rolled on, Colliers International said in a report yesterday.

And more declines are expected. ‘The economies of most cities in the Asia-Pacific region are likely to be in recession in the next 12 months notwithstanding the interest rate cuts and large stimulus budget,’ Colliers said. ‘As such, demand for industrial property is likely to stay weak.’

Except for Jakarta and Shanghai – where rents, land and capital values are expected to hold – those in other cities surveyed are forecast to decline as much as 30 per cent over the next 12 months.

In Singapore, average rents and capital values of factory space dipped 12.8 per cent and 17.6 per cent respectively between October 2008 and March 2009, compared with growth of 6.4 and 6.9 per cent in previous April-September 2008 review period.

‘The decline in exports as a result of the contraction in global demand led to excess capacity at manufacturing plants and prompted many firms to shelve expansion plans or downsize premises, leading to lower demand for industrial property,’ Colliers said.

Weakening exports also resulted in softer demand for warehousing space. Average rents and capital values of this space dropped 13 and 13.3 per cent respectively in the six months under review.

The Singapore government has cut its 2009 economic growth forecast to between minus-10 and minus-13 per cent, from between minus-6 and minus-9 per cent. And this will weigh heavily on demand for industrial property in the next 12 months, Colliers said. It reckons land prices, capital values and industrial rents here could drop as much as 15 per cent in that time.

Rents for high-spec industrial building space will also be hit, according to Colliers. ‘Moving forward, the influx of high-spec space completing in 2009, amounting to an estimated 2.5 million sq ft, coupled with sluggish demand, are likely to exert downward pressure of up to 30 per cent on rents in the next 12 months,’ it said.