Industrial property tenants refuse to relocate despite stiffer space competition

They're getting more practical.

According to Colliers International, it was observed that leasing enquiries had increased in 1Q 2014, particularly for industrial space that is zoned for “Business 2” use. Market interest has generally stemmed from manufacturing companies from the oil and gas industry, as well as info-communications companies such as data centre service providers.

However, the overall level of leasing transactions stayed subdued during the period, with most being lease renewals.

Here's more from Colliers International:

Ms Brenda Ong, Executive Director of Industrial Services | Project & Leasing, says, “The first quarter of the year saw tenants opting to renew their leases over relocating. Firms appeared to be channeling resources towards driving productivity instead of business expansion, taking heed from the Government to increase productivity amid a tight labour market.

The drive to reduce costs has also, in some instances, led to the relinquishing of space – such as Barclays which has announced that it would be giving up its space at Eightrium at Changi Business Park as part of its cost cutting measures.”

The low level of leasing transactions during the quarter could be attributed to the typically-slower activities due to the Lunar New Year festivities, the longer leasing process arising from the need to ensure that prospective tenants comply with the Government’s list of qualifying industrial space users, as well as tenants’ tight rein on costs, which, in some cases, lengthened the time needed to source and commit to space.

In light of the above, landlords – especially those with older premises or buildings with higher vacancies – were generally realistic in their rental expectations in 1Q 2014. The increased level of competition for qualified tenants, particularly from newly-completed developments, has also reined in rental growth.

Consequently, rents across all categories of industrial space remained relatively stable in 1Q 2014.

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