LATEST figures from JTC confirm the deteriorating scenario painted by private-sector industrial landlords - both developers and Reits - in their recent results announcements.
Second-quarter data showed both industrial prices and rentals falling 0.7 per cent quarter on quarter. Year on year, prices were down 0.9 per cent, and rents down 2.7 per cent.
While JTC attributed the downward trend to the government's boost in supply of industrial land and space in recent years, analysts also pointed to additional factors like the weakening Singapore economy and manufacturing sector, exacerbated by the labour crunch.
Q2 occupancy rates stood at 91 per cent, up 0.3 percentage point on both a quarter-on-quarter and year-on-year basis.
JTC said more supply - significantly higher than the historical three-year average annual supply and demand - will be added this year and next. This will probably push occupancy rates lower, it added. For 1H 2015, about 800,000 sq m of industrial space was completed.
For the second half of 2015, about 1.6 million sq m of industrial space is estimated to come onto the market. After that, in 2016, another 2.8 million sq m is expected to be completed. This adds up to about 10 per cent of the current available stock, JTC said.
Singapore Chinese Chamber of Commerce & Industry vice-president Lau Tai San welcomed Q2's rental decline as "a good trend to stabilise the market and make the costs of doing business more predictable for SMEs and micro-SMEs".
"The decline in rents is driven by the 1.2 per cent drop in the rentals of multiple-user factories, which tend to be the type of space used by small SMEs. Single-user factories tend to house much larger SMEs, and you can see that their rents fell less, by about 0.5 per cent," he noted.
To be sure, Desmond Sim, head of CBRE Research, Singapore & Southeast Asia, said it is not just the future supply and tougher regulatory policies that are affecting rentals.
The weaker growth of the Singapore economy and the manufacturing sector, exacerbated by the labour crunch, has also affected the performance of industrialists.
"That does have a significant part to play in the weaker rents," he said. "Cost containment is the top priority. Some industrialists are thinking about consolidating rather than expanding."
The manufacturing sector contracted 4 per cent year on year in Q2, extending the 2.7 per cent decline in Q1. The contraction was largely blamed on a fall in output in the biomedical manufacturing and transport engineering clusters.
Mr Sim added that private-sector landlords also have to contend with the state industrial landlord, which is JTC. JTC also builds specialised facilities to support the growth of specific clusters (eg. aerospace, biomedical, chemical, niche semiconductors).
"The government is creating supply, but at the same time, it is also a landlord. This is how it can control costs, and it is also a way to reduce speculation or profiteering. I think the government's recent moves are good for industrialists overall, but landlords will just need some time to adjust to the regulation changes."
Interestingly, some tenants have indicated a preference for space on private land so as to avoid the hassle of complying with a host of government restrictions and regulations, CBRE said in a recent report.
"The thing is, when you do a private treaty, you do not have to adhere to a lot of covenants attached to government land," Mr Sim said.
Leong Hong Yew, JTC's director of policy & research division, told BT: "The government has put in place a range of supply-side and anti-speculative measures to ensure a stable and sustainable industrial property market." These include restrictions on strata sub-division and space occupied by anchor tenants, as well as seller stamp duties, shorter land tenure, and longer minimum occupation periods before asset sales.
These "cooling measures'' followed a 110 per cent and 48 per cent jump in prices and rents from Q2 2009 (post financial crisis) to Q3 2013.
"This is because industrial land and space are a factor of production and not a tool for speculation, and prices and rentals should remain in check to prevent excessive increases in business costs.
"Given Singapore's limited industrial land resource, JTC has to ensure that our industrial land is put to the most productive and optimal use and supports Singapore's economic development."
On the bidding front, JTC data showed that the bid prices for small industrial government land sale (IGLS) plots, targeted at single end-user industrialists, have been holding up well, hovering around S$700-800 per sqm in Q2.
By contrast, bid prices for large IGLS sites, which are usually built by developers and then divided into strata units for sale, continued to weaken.
SLP International research head Nicholas Mak said: "The lower prices of land show that developers expect future prices of the finished product (at least three years later) to be lower, so they are willing to pay less for the plots. It's a sign that developers are less optimistic."
He expects industrial property prices to fall 1-2.5 per cent for the whole of 2015, while rents will drop 1-3 per cent.