Industrial sector weakens further

Source : Business Times – 7 Jul 2009

DEMAND for private industrial space continued to shrink in the second quarter of this year, says property firm DTZ.

And private industrial rents – in decline since Q4 2008 – registered steeper falls in Q2 2009 than in the two preceding quarters.

Average monthly gross rent fell 6.8 per cent for first-storey private industrial space and 8.1 per cent for upper-storey space in Q2 this year. This was the sharpest contraction since Q3 2003, when rents tumbled 8.3 per cent and 11.1 per cent respectively for first and upper-storey space.

Compared with the peak in Q3 2008, average rents for first-storey and upper-storey private conventional industrial space have fallen 12.8 per cent and 17.1 per cent.

Hi-tech industrial properties were again hit harder than other types of industrial properties space in Q2.

Amid lower demand in the industrial and office markets, hi-tech industrial rents posted their biggest contraction since Q2 2003, falling 12.8 per cent in Q2 2009 to 24.4 per cent below the peak in Q3 2008. Hi-tech industrial properties include business park and science park space.

New private industrial space of 30.6 million sq ft is expected to be completed between Q2 2009 and 2013. According to Urban Redevelopment Authority statistics, 24.6 million sq ft – or 80 per cent of the 30.6 million sq ft of private industrial space in the pipeline – is already under construction, with most scheduled for completion by 2011.

‘2009 will see substantial new supply of 16.9 million sq ft private industrial space, which is 46 per cent above average annual demand of 11.6 million sq ft per annum during the past five years,’ said Chua Chor Hoon, DTZ’s head of South-east Asia research. ‘The outlook for the industrial market remains weak through 2009 to 2011 due to demand-supply imbalances and weakness in the office sector.’

The hi-tech segment is likely to be most affected, with 5.1 million sq ft of private business park space in the pipeline, on top of 8.6 million sq ft of existing stock, Ms Chua said.