Industrial property prices rose in the third quarter as investors looked to avoid earlier cooling measures in the residential market but the pace of increase has slowed, according to a report from consultancy DTZ.
Resale prices for upper-storey industrial space increased 3.5 per cent in the third quarter compared with the previous three months. That's a slowdown: Prices had risen 4.9 per cent in the second quarter over the first.
Values have surged 8.5 per cent in the first nine months of the year, however.
The gains come despite rents flat-lining in the wake of slowing manufacturing activity.
DTZ said buyers were more cautious in the July to September period, with prices already at high levels and the Government indicating that it could impose cooling measures.
It is also watching for increasing speculative activity in the industrial sector.
Only rents for high-tech industrial space rose in the three months to Sept 30 and that was by just 0.7 per cent. Rents for first-storey and upper-storey conventional industrial space remained stable.
Ms Angela Tan, DTZ's regional head of occupier services, said: "Most landlords maintained their asking rents as they continue to receive a steady stream of lease inquiries.
"Healthy demand emanated from corporate occupiers seeking expansion space, particularly those in the pharmaceutical, biomedical and engineering sectors."
A Knight Frank report noted that rents stayed flat in the MacPherson and Clementi-Bukit Batok clusters in the third quarter but rose for the Woodlands and the Kaki Bukit-Ubi clusters, as they are the "next emerging spot" for industrial property, it said.
"The growth in rentals in Woodlands and Kaki Bukit-Ubi clusters was mainly driven by the newer developments, while the Ang Mo Kio cluster commanded higher rents due to its centralised location and shortage of new supply in this locality," said Knight Frank research head Png Poh Soon.
"The older industrial properties located in Paya Lebar cluster experienced a rental drop of 1.7 per cent due to competition from the newer properties in Kaki Bukit-Ubi cluster."
About 21 million sq ft of private industrial space is expected to be completed from July this year to the end of next year, translating into an average annual supply of about 14 million sq ft.
This includes North Spring Bizhub, with about one million sq ft of space, 628,000 sq ft at One@Changi City and Infinite Studios, with about 181,000 sq ft. This is higher than the 10-year average annual take-up of 10 million sq ft, DTZ noted.
Ms Chua Chor Hoon, DTZ's head of Asia Pacific Research, said yields for industrial properties are likely to be squeezed further.
"The slowdown in the overall manufacturing sector and upcoming supply will put pressure on industrial rents, while ample liquidity will continue to nudge investors to the sector, barring any government measures to temper purchases," she added.