www.shaproperty.com

RENTS and capital values of industrial space have remained flat, while demand for prime retail space grew in the second quarter, according to a recent report.

Property consultancy group CB Richard Ellis (CBRE) said in its report that the average monthly rents for prime factory space remained at $1.25 psf and $1.00 psf for ground and upper floor units respectively, while average capital values for freehold factories were unchanged at $332 psf for ground floor units and $270 psf for upper floor units.

This was unlike the previous quarter where average monthly rents rose by $0.05 psf and capital values grew by 2 per cent.

Average monthly rent for high-tech space also stayed at $1.85 psf in the quarter after rising 5.7 per cent previously. The average occupancy rate continued to rise from 88.1 per cent in Q1 to 90.1 per cent in Q2 as more companies set up research and development centres.

Average monthly prime warehouse rent remained at $1.25 psf for the ground floor units and $1.05 psf for upper floor units. Similarly, average capital values for freehold warehouses were unchanged at $385 psf and $335 psf for the ground and upper floors respectively.

Taking into account the strengthening economy and positive outlook, CBRE expects the rents for all industrial space to rise by a further 1.0 to 1.5 per cent by year end.

In the retail sector, CBRE notes a healthy leasing demand and active retail sales in Q2. The commitment of retail space in the various new developments that are slated to open in the second half of the year showed that leasing demand during this quarter is still going strong.

The CBRE islandwide prime retail rental index increased by 0.7 per cent from the previous quarter, which it largely attributes to rents in the City Hall/Marina Centre area. Rents there rose by a higher 2.5 per cent, due partly to the increase in rents at the newly renovated Marina Square and Suntec City, which is being upgraded.

Prime rent in Orchard Road rose 0.9 per cent to $33.60 psf a month while suburban prime rent remained at $27.20 psf a month. CBRE also observes that the Marina Bay Integrated Resort (IR)'s Marina Bay Shoppes could add a potential 117,100 sq m of retail space when the IR is completed in 2009.

In the government land sales programme, Somerset Central was opened for tender this quarter and will close on Aug 16. At least 60 per cent of the maximum GFA of 39,419 sq m is required to be retail, F&B and/or entertainment. And this could yield close to another 18,590 sq m of retail space, said CBRE.

CBRE also notes the possibility for the Somerset Centre site, the Orchard/Killiney Road site and the existing Specialists' Shopping Centre to be developed together to leverage on the Orchard Road frontage. Hence, CBRE expects aggressive bidding by developers as this is possibly the last remaining prime space site along Orchard Road.

Overall, CBRE sees a positive outlook in the retail market. 'Landlords will continue to benefit from rising rentals, particularly those in the Orchard area, in view of the fact that the bulk of new supply will only come onstream in 2008 and 2009,' said CBRE.