Factory rental rates decline in Singapore in Q1
ACCORDING to DTZ Southeast Asia, average monthly rents for conventional factory space in Singapore eased by 3.5 per cent quarter on quarter to 1.80 Singapore dollars per square foot (Bt500 per square metre) in the first quarter 2016, the third consecutive
Monthly gross rents of first-storey and upper-storey factory space declined by 3.3 and 3.6 per cent quarter on quarter to S$2.00 and $1.60 per square foot respectively in the first quarter. The compression in rents reflected the contraction of the manufacturing sector from mid-2015 to date. According to the Singapore Institute of Purchasing and Materials Management, the Purchasing Managers’ Index remained below the threshold 50 reading for a ninth straight month in March.
This was due to the continual hit of the manufacturing sector by weak global export demand and effects from ongoing economic restructuring. As a result, the number of workers laid off in the manufacturing sector increased by 31 per cent to 5,220 in 2015 from 3,980 in 2014.
Similarly, monthly rents for business-park space fell by 2.0 per cent quarter on quarter to $4.90 per square foot in the first quarter of this year, because of the subdued macroeconomic environment.
The weaker office market also exerted further downward pressure, as traditional office occupiers that qualify for business-park space are less compelled to move to business parks, while some business-park occupiers may consider “upgrading” to office space as the cost gap narrows.
However, the expected growth in the ICT (information and communications technology) and biomedical sectors may help support the demand and rents for business parks.
Amid the subdued manufacturing sector in Singapore, the biomedical manufacturing cluster continued to perform well in the first two months of 2016. Output grew by 5.8 per cent year on year in February, after expanding by 28.9 per cent year on year in January.
Its growth trajectory is expected to continue as more biomedical companies set up or expand their research and development facilities in Singapore.
A case in point is Lite-On, a supplier of LED (light-emitting diode) products, which has had its regional headquarters and R&D centre in Singapore since 2008. The Taiwan-based company plans to invest a further $40 million in the biomedical industry over the next three years, which will include the establishment of a biomedical R&D centre in Singapore.
