SINGAPORE - The proximity of industrial property in the southern part of the island to the central business district (CBD) has made it popular with investors and businesses.
Areas like Bukit Merah, Commonwealth and Queenstown have long lured buyers thanks to their good MRT connections and the short drive to the city.
"These areas are known as the CBD of industrial buildings because of their location," said Colliers International's executive director of industrial services Tan Boon Leong.
But rent in these city fringe areas is higher than that in other popular industrial estates in the suburbs, said Knight Frank Singapore's executive director and head of industrial Lim Kien Kim.
"Average industrialists used to the Ubi or Tai Seng area will find that place expensive to operate from," he added.
Industrial properties in these areas are zoned B1 - limited to clean and light industries - so they have attracted tenants looking for an alternative to the CBD, noted Mr Lim.
But tenants who do not need buildings with a posh-looking facade might not be keen on property there due to the higher rent, he said.
Average rents of freehold and leasehold industrial properties across Bukit Merah, Commonwealth and Queenstown are $2.80 per sq ft (psf), according to Knight Frank data.
Higher rents also mean that much of the interest in the area has been driven by industrialists with products higher up the value chain, analysts noted.
For example, local fashion labels started setting up operations and warehouses in Bukit Merah about a decade ago, while Commonwealth and Queenstown have also been home to car showrooms, Mr Lim said.
Analysts also noted that rental yields are attractive.
Gross rental yields for a 99-year leasehold industrial unit in the vicinity are about 5.4 per cent.
Central Link had the most page views of any industrial property in the area on the STProperty portal last month.
The 99-year leasehold building in Bukit Merah has about 60 years left on its lease, with an average asking price of $772 psf, according to STProperty data.
Recent transactions of industrial property in the south include a unit at E-Centre @ Redhill that sold at $727 psf last month, according to Urban Redevelopment Authority data.
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