JTC rolls out new and improved industrial price, rental indices

Singapore

IN a bid to provide a better reading of Singapore's industrial landscape, JTC Corporation has introduced new industrial price and rental indices that come with an expanded data coverage and improved methodology. INFOGRAPHIC: Improvements to industrial price and rent indices

This move, along with the release of more detailed rental data, came amid increased lobbying by various stakeholders for more granular data to be made available for businesses to make informed decisions.

From the previous six indices, JTC has expanded its slate of industrial price and rental indices to 24.

These include price and rental indices for single-user factory space as well as sub-indices for multiple-user factories based on planning region, land-use zoning and remaining tenure. Rental indices for business parks and warehouses are also rolled out.

The data coverage of the indices is expanded to islandwide, as opposed to only covering the Central Region previously.

To improve the way indices are computed, JTC has started to classify properties by more attributes such as location, remaining tenure and land-use zoning, as well as changed the index weights from a moving weight to a fixed weight. This ensures that index movements track true changes in price or rent, and are not caused by changes in quality of properties transacted from one quarter to another.

All these changes took effect from JTC's fourth-quarter industrial statistics released on Thursday, following the launch of the Fair Tenancy Framework on Tuesday containing guidelines for transparency of rental data across all areas and property types.

Terence Seow, assistant CEO for corporate, policy and planning group at JTC, told reporters that these changes have culminated from a review that took place over a year.

Even before JTC took over the function of collecting and disseminating industrial property data from the Urban Redevelopment Authority (URA) early last year, it had received industry feedback on the need to review the methodology, he said. The indices were last reviewed in the first quarter of 2000.

According to JTC, the use of an expanded data coverage islandwide and an enhanced index methodology does not change the direction of prices and rents in previous quarters.

Leong Hong Yew, director of policy and research division at JTC, noted that 15 years ago when the index was last revised, multiple-user factories were mostly concentrated in the Central Region.

But JTC has since ramped up supply of multiple-user factories in the east and west of Singapore, prompting a need to revise the indices.

"If not the index's movement will not represent the true market movement," he said.

Previously, when indices were computed using moving weights based on the past 12 quarters of transaction values, the index could be skewed by a sudden spike in transactions of any particular property types, for instance freehold properties, in a quarter, Mr Leong pointed out.

"Nowadays, with more specialised facilities coming up and transacted in the market, if this is not taken care of, it will lead to spikes in the indices that actually don't represent market movement but is due to a change in the quality of the underlying assets," he explained.

The fixed weights based on one year of transaction values in the base period will not be revised unless there is a significant change in the market structure that renders the current weights less meaningful. All indices will be rebased to the fourth quarter of 2012 but this adjustment will not affect quarterly percentage changes.

Due to a lack of sales transactions in strata-titled warehouse space, JTC will discontinue the price index for warehouses since it mainly captured multiple-user strata-titled warehouses - now a small portion of the market - and therefore does not present a fair picture, Mr Leong said.

Similarly, the lack of sales transactions in business parks, mainly owned by institutional funds and Reits, renders it impossible to come up with a price index for this category now.

Market watchers welcomed the added clarity that the new and improved indices bring to various stakeholders.

Savills research head Alan Cheong noted that this offers industrialists, researchers and policymakers a "richer texture of statistics" to fulfil their respective needs. "Although greater transparency may not lead to lower rents, but it should lead to less variations in the rents concluded since the level of opacity has been reduced," he said. "For industrialists who often do not keep track of developments in the leasing market, the new indices and rental information serves as a quick reference point to get their orientations correct when they are about to engage in lease renewals or signing up rents for additional premises."

Chia Siew Chuin, director of research and advisory at Colliers International, noted that JTC can continue to improve market transparency by availing more granular information. "For example, this could include the release of sales progress and selling price information for new strata-titled industrial projects, similar to what URA has been doing for the private residential market."

READ MORE: Industrial capital values, rents dip in Q4; occupancy at 90.9%