Wednesday, November 15, 2006
[RealEdge] BT : 'Other' space in demand
| Published November 14, 2006  | |||
| 'Other' space in demand DOMINIC PETERS and LIM SOK PENG say high-tech industrial space is getting hotter nowadays
OFFICE space has been in the limelight in recent months due to the shortage of Grade A office space and rising rents in the city. Although attention continues to be on Grade A office space, there is a growing demand, albeit at a slower pace, for high-tech industrial space. High-tech industrial space is defined as an industrial building equipped with office-like infrastructure such as centralised air-conditioning system, state-of-the- Most of these developments will also include leisure facilities and business amenities such as swimming pool, tennis court, food and beverage outlets, auto-banking and conference facilities. Some of the high-tech industrial buildings are purpose-built for specialised industries, while others are developed as generic high-tech industrial buildings. As the Singapore economy shifts towards high-tech, R&D and knowledge-intensive industries, the demand and take-up rate for high-tech industrial space is expected to rise. This is largely due to the increasing presence of new industries as well as the expansion of existing high-end light manufacturers, infocomm companies, R&D specialists, disaster recovery/data housing operations and bio-tech supporting businesses. These companies find such high-tech industrial space ideal for their operations, rather than conventional light industrial developments. The new class of buildings comes equipped with office-type infrastructure as well as leisure facilities and business amenities. Besides attracting companies that engage in high-tech, R&D, value-added and knowledge-intensive activities, these generic high-tech industrial buildings have also attracted another group of users: banks and insurance companies. This group of users from the financial sector sees high-tech industrial space as a viable alternative to prime office space in the Central Business District (CBD) for backroom operations. Although the Urban Redevelopment Authority (URA) in 2003 allowed 40 per cent of the industrial development to be used for ancillary activities, this trend took off only recently, when rents of office space started to move upwards. The current asking monthly rental rate for Grade B office space is in the region of $4-6.50 per sq ft. Hence, a high-tech industrial space in the central region currently being offered at a monthly rent of $2.20-2.50 psf would be considered a more cost effective alternative. The high-tech industrial developments have an office-like facade, finishes and facilities that meet the requirements of these users. Developments which are located nearer to the CBD and are easily accessible by a good network of roads and expressways are always preferred. High-tech industrial buildings situated in central locations such as Kaki Bukit, MacPherson or Paya Lebar are generally more popular and enjoy greater occupancy rates. The expansion of these companies coupled with the spillover from an already tight office space market will likely push up the demand for high-tech industrial space. The strong demand is likely to push the occupancy rate of the overall high-tech industrial space to a healthy 87.9 per cent, a 1.2 percentage point increase from Q2. Notable developments such as Northtech, The Signature, Siemens Centre and Techpoint are already fully occupied or close to it. On the whole, the occupancy rate for high-tech industrial space is higher than the conventional multi-user factory space. Due to the scarcity of these properties in the north-east and northern regions of Singapore, the occupancy rates here have already reached as high as 97.3 and 96 per cent respectively. Although high-tech industrial space in the western region has registered lower occupancy than that in multi-user conventional factories, a high-tech industrial development such as the International Business Park is still well sought after, with over 90 per cent occupancy. Its popularity is no doubt attributable to its proximity to supporting high-tech industries. Although we are seeing a steady growth in the demand for high-tech industrial space, the supply is still limited. The amount of private high-tech industrial space stood at 14.7 million sq ft, accounting for only 5 per cent of the total factory space in Singapore. Among the high-tech industrial space, 42.5 per cent of it is in the central region, with the rest in the north (0.9 per cent), north-east (9 per cent), east (20.8 per cent) and west (26.8 per cent) of Singapore. Due to the tight supply, the rental rates for high-tech industrial space have been on the rise since the beginning of this year and will no doubt continue to move upward. The current asking monthly rent for high-tech industrial space is between $2.20 and $2.60 psf, and has hit as high as $2.90 psf in the International Business Park. Buoyed by the upbeat economic conditions and the economy's progressive shift towards value-added and knowledge-based industries, the demand for high-tech industrial space is set to grow. On the other hand, the supply of new high-tech industrial space, projected around 1.87 million sq ft, will come on stream over the next two years. About 18 per cent of the new developments will be owner-occupied. The remaining 82 per cent will include Neuros @ Biopolis, slated for completion soon; and Fusionpolis and Eightrium, which are expected to be completed next year. We see rents for high-tech industrial space continuing to rise by 5 per cent by the end of this year and another 10 per cent by the first half of 2007. Dominic Peters is director of Industrial Business Space, Savills. Lim Sok Peng is assistant manager, Research & Consultancy, Savills |
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