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Government trims confirmed-list industrial land sales for H1 2015
THE Ministry of Trade and Industry (MTI) continues to taper industrial government land sales under the confirmed list for the next half-year, as the industrial property market shows signs of stabilising (see infographic).
It will offer nine sites totalling just 6.46 hectares (ha) on the confirmed list. This is about half the approximate 12 ha of state land it released in each of the six-month periods in 2014. It is also the lowest half-yearly quantum on the confirmed list since H1 2011.
Asked for the rationale behind the land-supply taper, MTI said it had already released significantly more land between 2010 and 2014 - an average of 42 ha per year including reserve list sites, compared to around 32 ha from 2005 to 2009.
This was done to moderate prices and rentals, which had risen by around 16 per cent and 8 per cent per annum respectively in the last four years.
Going by the latest Q3 statistics, the ministry's strategy has worked.
In addition, 2.6 million square metres of industrial space is expected to be ready in 2015; another 1.9 million sq m will become available in 2016.
R'ST Research director Ong Kah Seng said: "This is a calibrated move by the government to mitigate a risk of oversupply in industrial properties in future."
Knight Frank executive director (industrial) Lim Kien Kim called it a "measured move", given the uncertain economic outlook going into 2015.
The latest weak manufacturing figures in November have led economists to predict that full-year GDP growth will come in at below the government's projection of "around 3 per cent".
Transactions of factory space halved in 2014, both in value and volume, on the back of seller stamp duties, loan curbs and poorer demand from manufacturers struggling with high labour costs.
Analysts noted that, among the land parcels released this time, there is little opportunity for strata development, which makes for good news for developers with many vacant and unsold strata industrial units.
Knight Frank's Mr Lim said: "The reason is probably due to the current abundant supply of strata industrial units in the primary and secondary market. We should thus see more interest in current projects and the secondary market, thereby reducing the total vacancy in the market."
SLP International executive director Nicholas Mak said that a huge supply of strata-titled industrial developments - 10 large projects with a total gross floor area of 500,900 sq m - could be launched in the next two years.
There has also been a continued release of sites under one hectare and with shorter tenures under the government's drive to make it more affordable for end-users to bid for land and build their own production facilities.
The shorter tenure is designed to weed out speculative traders, who would not want to struggle to resell a property with so few years left on the lease. Eight of the nine confirmed-list sites for the next half-year have 20-year leaseholds.
All but one plot on the list are zoned B2, for heavier industrial use; only one site in Ubi Ave 1 is zoned B1.
Coming after a hiatus of B1 sites in H2 2014, Mr Ong said this was probably done to avoid a severe shortage of B1 space down the road, amid a proliferation of completed B2 space.
"That would have led to major increases in rents and prices of B1-use factory space," he said.
This round, MTI actually boosted its reserve-list land supply to 7.62 ha, from 6.81 ha previously.
Confirmed list sites are launched according to schedule, whereas reserve list sites are launched when developers offer a minimum price that the government deems acceptable.
Mr Ong said this is expected. "When confirmed list sites have been trimmed, reserve list sites become an alternative for industrialists. In case there is slightly higher demand for land, the authorities will leave it to the developers to trigger the reserve list sites."