SINGAPORE Dec 3 Far from the madding crowds of
Singapore's glitzy shopping malls, Cynthia Neo runs a bridal
boutique tucked away in a nondescript industrial building in an
old housing estate, pushed off the high street by pricey retail
The owner of J&C Bridal Collections pays one quarter the
rent she once shelled out for a shop in the heart of Chinatown,
where a string of restaurants, hotels and retail shops meant a
steady stream of shoppers.
But rising rents may be creeping into the industrial parks
too. Industrial property prices have surged 27 percent this year
after a government crackdown on residential investment pushed
speculators into factories and warehouses.
Residential property developers are starting to wade into
the light industrial market too, trying out upscale "lifestyle"
office parks that look like posh condominiums.
Some established industrial players say valuations are
getting a bit too rich.
"It's been our assessment that the market has started to get
a little hot," said Nick McGrath, chief executive officer of
Singapore-listed AIMS AMP Capital Industrial REIT.
"We've used the strength of the market in the last 12 months
to sell properties rather than buy," McGrath said, adding that
the real estate investment trust has shifted its focus to
upgrading existing assets instead of buying more.
Singapore's government has introduced six rounds of measures
to cool rising home prices, including an additional stamp duty
aimed at foreign buyers and a cap on tenures for all new
residential property loans.
Those moves succeeded in capping property price increases
this year - the residential market is up just 0.96 percent
through October - but they did not bring about the 10 percent
fall that some analysts had predicted.
Now the government is turning its attention to industrial
property. To make land prices more affordable to businesses, in
July, it capped lease terms for industrial sites sold under a
government land sales programme at 30 years instead of 60.
Singapore's light industrial parks, typically simple
mid-rise buildings with a few standard facilities like cargo
lifts and unloading bays, are home to small- and mid-sized
startups, wholesale businesses and back-end offices.
But rising shop rents have made them increasingly attractive
to store owners who would normally prefer customer-friendly
malls or pedestrian-filled shopping streets, and some have
started converting part of the industrial space for retail.
The rising industrial property prices have not fully
filtered through to rents in these buildings, which are up a
relatively modest 6 percent this year, but when long-term leases
are renegotiated, tenants may be in for some nasty shocks.
That could create problems for small business owners, who
are grappling with higher operating costs.
"Inflation and labour costs are already high. Some are
worried about rents that may inadvertently increase in tandem
with prices," said Png Poh Soon, head of research at Knight
That may lead some businesses to buy industrial properties
instead of renting.
"Together with the investors, the increase in demand drove
prices up amidst cheap financing, creating a self-fulfilling
prophecy of higher prices and cost of doing business," he said.
Pixal Culture, a photography studio that caters to weddings,
bought a unit in an industrial building in western Singapore in
2008, owner Steven Yeo said.
"It's much easier, because landlords may get you out after a
few years. Nobody can increase our rents," he said.
Singapore Member of Parliament and entrepreneur Inderjit
Singh asked the government last month what its plan was to keep
industrial land affordable for small- and medium-sized
enterprises. Local media reported that the response from Lim Hng
Kiang, the minister for trade and industry, was that rising
industrial rents have not dented Singapore's competitiveness.
WAREHOUSE WITH A POOL
McGrath, of AIMS AMP Capital, said he has observed more
investors speculating in the industrial market's strata
subdivided space, where carved-up smaller units have commanded
per square foot valuations some three to six times more than his
The sharp rise in industrial property prices has rung alarm
bells for some, but attracted interest from developers new to
this space. Construction firm Hock Lian Seng Holdings Ltd
won a bid in June to develop a site in an industrial
area in Singapore's east.
Residential developers are also getting into the industrial
game - and bringing some homey touches with them.
Oxley Holdings Ltd, which has built residential
projects with units selling for $2 million apiece, started
developing "lifestyle" industrial properties last year -
complete with swimming pools, gyms and rooftop gardens.
It has launched four such projects, two of which have been
fully sold, indicating strong demand for strata-title units
despite high valuations.
(Reporting by Charmian Kok; Editing by Emily Kaiser)