SINGAPORE - Industrial property has enjoyed a red-hot year but whether this can continue next year remains a question mark.
Analysts point to an increase of new supply next year that could cool the sector that has logged one of its best years in recent times.
Take prices. Industrial property values easily overtook residential prices in terms of growth rate.
They shot up a startling 26.7 per cent from the start of the year to the end of the third quarter, based on the Urban Redevelopment Authority's (URA) industrial property price index.
Prices in the July to September quarter were 31.7 per cent higher compared with the corresponding period a year earlier.
Multi-user factory prices shot up 32.7 per cent in the third quarter compared to the same period last year and they are up by at least 27.9 per cent since the start of the year.
Prices for multi-user warehouses followed closely, climbing 27.9 per cent in the three months to Sept 30 over the preceding period last year. Prices in this segment rose 20.9 per cent in the first nine months of this year.
The contrast with the private residential market could not be starker with prices for new housing units up a minuscule 0.6 per cent year-on-year in the third quarter.
Office sector prices rose 1.9 per cent in the third quarter year-on-year while shop values were up 1.1 per cent.
The story for industrial rents was more subdued. They rose 6.4 per cent in the third quarter from the preceding year, and have climbed 6 per cent over the first three quarters of this year.
Sky-high industrial property prices mean rental yields have been severely compressed.
They used to range from 5 per cent to 7 per cent but have now fallen to between 3 per cent and 5 per cent, said Mr Lee Sze Teck, senior manager for training, research and consultancy at Dennis Wee Group.
Despite industrial property's apparent popularity, the number of strata industrial transactions in the first 10 months of this year was lower than that in the corresponding period last year.
This was probably because of some price resistance, said Mr Lee. "Some new industrial developments were going for more than $1,000 per sq ft, which could have caused some investors to baulk. These investors could have gone over to the residential or commercial markets," he added.
Notable industrial developments across the island include the 15ha Paya Lebar iPark, a pilot project by JTC that incorporates green spaces and specially designed buildings. There are also Alexandra Technopark and Mapletree Business City in the west, and projects such as UE Bizhub at Changi Business Park in the east.