Industrial prices and rents continue downtrend in 3Q2017
By Timothy Tay
/ EdgeProp |
According to JTC’s latest market report, the price index for all industrial space continued on its downtrend in 3Q2017, falling -0.9% q-o-q and 7.4% y-o-y. However, the rate of decline has decelerated, noted Nicholas Mak, executive director of ZACD Group. The price index fell 2.2% q-o-q in 1Q2017 and 1.6% in 2Q2017.
The rental index of all industrial space fell by 1.1% q-o-q and 3.2% y-o-y. This is a steeper rate than the 0.8% q-o-q decline in 2Q2017, says Mak.
The net take-up of industrial properties has been more encouraging, says Christine Li, director of research at Cushman & Wakefield. Transaction volumes rose 7% in 3Q2017 compared to a year ago, the first y-o-y increase since 4Q2012.
Li attributes the unexpectedly higher net absorption of multi-user factory space, which more than doubled compared to 2Q2017, to stronger manufacturing output and a prospective economic upturn. But this is still lower than the transaction volumes recorded three years ago.
The northeast planning region saw the largest negative change in the rental index for multiple-user factory space. It saw a -1.6% change q-o-q, while the East saw a -0.6% change.
Li expects the pressure on industrial rent and occupancy to continue “as industrial overcapacity has been dragging down the demand for space amid economic restructuring. This is in line with the fact that industrialists are consolidating their business spaces and putting their business expansion plans on hold due to the uneven recovery in the manufacturing sector.”
However, prices could bottom in 2H2018, ZACD’s Mak opines, “as the strong supply of new industrial space starts to taper off. Next year, an estimated 1.1 million sq m of industrial space is expected to be completed. After reaching the peak in 2018, the supply of new industrial space is expected to moderate to 722,000 sq m in 2019 and further moderate to 536,000 sq m in 2020.”
“Furthermore, there will be an absence of new strata-titled industrial projects available for launch next year. This would limit the supply of new strata-titled industrial units available for sale in the market, which would contribute to firm up the projected property price recovery,” he adds.
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