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Singapore industrial property market picking up!

Wednesday, July 6, 2011

People tell me to be careful about investing so much in industrial property S-REITs. They think it is going to experience a contraction in demand. I personally do not think so and shared my research here in my blog.

"According to Colliers International, average monthly gross rents for prime factory and warehouse spaces surged between 6 and 7 per cent on-quarter. This was the fastest quarterly growth in three years.

"But rents for all segments of prime factory and warehouse space are still below peak rates in the second half of 2008...

"Chia Siew Chuin, Director of Research & Advisory of Colliers International, said rents and capital values of industrial properties are expected to grow more moderately, in the range of 10 per cent in second half of this year." Read full article here.

For AIMS AMP Capital Industrial REIT, leases representing 4.3% of its rental income are due to expire in the financial year ending March 2012. We could see some positive rental income growth and, therefore, higher DPU, everything else remaining equal. With its properties likely to enjoy another bout of revaluation upwards, we could see its gearing level dropping as well. Good news are in the pipeline, it would seem.

Good luck to fellow unitholders.

Related posts:
Higher rents to benefit industrial properties S-REITs.
Industrial rent forecasts strongest for Singapore.


Harry said...

Hello AK, I have signed up for the Lim & Tan trading account. But I cannot find the charting option after I log in. Is the charting application part of a redemption rewards program ?

AK71 said...

Hi Harry,

It should come free with your trading account. Give them a call to check on this. :)

Hwang said...

I opened Stanchart trading account, it says there is no minimum trading fees, usually $25. Good for small time investor like me :)

Another thing, First REIT's going to South Korea. Just when i thought about increasing my holdings, the price went up... What do you think of First REIT's venture?

AK71 said...

Hi Hwang,

First REIT has been a very good investment thus far. I am somewhat surprised by the acquisition, always thinking that the REIT would concentrate on expanding their portfolio in S.E. Asia.

AK71 said...

The threat of oversupply is looming over the industrial property sector. Come 2013, a gush of new industrial space is expected to flood the market and investors need to keep a closer eye on this asset class. From now till 2015, spot rental rate might drop between 7 and 10% while vacancy rates increase by between 4 and 5% across the sector, cautions DBS Vickers in a report on the industrial REIT sector.

Despite the tepid economic growth, industrial properties have done well this year. Firstly, there has been a lack of “meaningful” supply over the past two years. Total industrial space at 7.5 million sqft is not only at a 10-year low but also 20% lower than the 9.1 million sqft annual average over the past decade. This has caused industrial space vacancy levels to hit a record low of 6%, thus driving up average rental for both factory and warehouse space by a third although the pace of increase has moderated recently. Capital values, meanwhile, rose between 6 and 26% since the start of 2012.

To be sure, the residential property asset bubble has been stoked by strong liquidity and historically low interest rates. But the numerous rounds of cooling measures introduced by the government diverted investor attention towards the industrial sector. In particular, the smaller-sized strata-titled units drew a lot of buying interest from non-traditional sources.

However, challenges loom. “Looking ahead, we see market dynamics turning given that close to 49.7 million sqft of industrial space currently under construction will be completed over 2013-2015. This, on an annualised basis, represents more than twice the annual supply over the past decade,” write DBS Vickers’ analysts Derek Tan and Lock Mun Yee the Dec 6 report.

Mind the glut.

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