Singapore property auction market has seen reasonably strong purchasing demand notwithstanding recent hiccups along the path to economic recovery. In the last two quarters, industrial property buyers’ interest has returned, according to real estate auctioneers.
Commercial and industrial property interest rates have risen to pre-pandemic levels, according to CBRE. According to Edmund Tie’s director of auction and sales, Joy Tan, the industrial and commercial sector was hard affected last year by the Covid-19 epidemic, which caused several companies to go under and employment rates to increase.
Because of this, a lot of people who were considering buying these assets waited. According to Tan, they weren’t considered smart investments at the time since finding new renters were tough and there was uncertainty about how well SMEs would do in the face of the epidemic.
The progressive relaxation of safe-distancing regulations and the resumption of physical auctions in 4Q2020, according to Sharon Lee, head of auctions at Knight Frank Singapore, resulted in pent-up demand with seven industrial properties being sold at auction during that quarter.
Each of the seven industrial properties had a floor area of about 2,500 square feet, making a total investment of under $1.5 million. As she points out, this was likely attractive to buyers who purchased the homes for their personal use.
Before the epidemic, just a few industrial and commercial properties had sold at auction, according to her. According to Knight Frank’s findings, just four industrial properties were auctioned in 2018 compared to six the year before.
In order to obtain the best potential price, prospective purchasers preferred to wait and see how long it would take an offer to reach the reserve price, according to Lee.
After pre-auction marketing, she claims, six industrial properties were sold without an auction in 1Q2021, despite just one selling for $808,000.
Focusing on Factory Assets
In recent years, property prices have remained relatively constant in Business 1 (B1) and Business 2 (B2) factory units, according to PropNex Realty’s Clarence Goh, head of corporate sales and auction. Tenancy demand has increased as companies and industrialists seek space in Singapore.
Clean and light manufacturing businesses are permitted on plots designated B1 under URA’s land zoning and development restrictions, whereas general and special industries are zoned B2 under the authority of URA.
Goh claims that property designated B2 usually has a leasehold term of 30 to 60 years. Per square foot, the built-up area likewise varies between 1400 and 1,700, with an average price of $400 to $500 psf.
This means that prices for most of these properties are within reach for both owner-occupiers and investors, according to Mr Smith.
B2 manufacturing development 17D Tuas Road is being marketed by Knight Frank’s auction team. The suggested price is $1.8 million ($110 psf), according to the property listing. JTC constructed the factory on a 5,292 square foot site, and the leasehold term began in 2006, thus this is a mortgagee sale.
Built-up space is 16,242 square feet, and there are 20 apartments spread over two industrial terraces. With its approval for maritime HVAC and a/c as well as storage and distribution of marine equipment, the facility is presently in operation.
Rise in Industrial Auction Listings
PropNex’s Goh says: “In recent months, more industrial properties appearing on auction lists and in private treaty transactions has increased. Owners are using auctions to sell their assets since they are a more transparent way to do it.”
A rising number of companies may be interested in buying their own homes in order to save money on rental expenses in the long term, as Edmund Tie’s Tan observes in his article. As the price for the latter is cheaper and therefore makes more economic sense, companies may opt to relocate some of their office activities from commercial space into a B1 manufacturing facility, with certain B1 factories also allowing for partial office use.
Some factory owners are looking for space that may also serve as dormitory space for their own foreign employees because of the frequency with which the Covid-19 community transmissions have occurred in dorms housing foreign workers, according to Goh.
According to him, when a company acquires an industrial space for its own use, it may also seek to utilize part of the area as dormitory space for its hired employees, subject to permissions of course.
Business owners get a production and operations area as well as a safe place to house their international employees without having to expose them in the common dorms, according to him.
Because of the border restrictions between Singapore and Malaysia, many Singapore-based companies with manufacturing facilities in Johor are now forced to hire staff in Singapore in order to keep operations operating. Since March of last year, there has been no non-essential travel between Singapore and Malaysia.
Light industrial businesses such as carpentry, tiling, plumbing, and air-conditioning repair are seeing an increase in demand for B1 and B2 manufacturing units in Singapore as a consequence of this, adds Goh.
With the increase in demand, many factory property owners and investors have been urged to list some of their assets for sale, believing that now is a good moment to take advantage of buyer interest.
[Is it still too early to make a phone call?]
Knight Frank’s Lee believes “it is premature to characterize the buying interest as robust at the present” despite a rise in the number of people interested in purchasing industrial units at auction.
Amidst a chip scarcity and increased usage and mature application of technologies after COVID-19, there are some grounds for optimism about manufacturing space demand from the electronics cluster.
With nine months left in the year 2021, the remaining industrial space will be finished, with single-user and multiple-user manufacturing spaces accounting for 75% of the total. We will have to wait and watch with so much fresh supply on the market, particularly if factory unit asking prices exceed $1 million, whether the purchasing trend of industrial units at auction will continue,” she adds.
Single-user and warehouse occupancy both decreased by 0.1 percentage points in the first quarter of this year, according to JTC’s industry data for 1Q2021. There were six single-user factory completions in 1Q2021, although they were all very modest, each under 0.2 million sq ft, according to CBRE’s analysis. Project completions contributed to this.
According to the consultant, single-use industrial space supply would reach 8.58 million sq ft by the end of the year, the highest level since 2017, as a result of the pandemic-related delays in 2020.
According to Lee, the number of industrial listings on the auction market dropped from 60 in the previous quarter to 38 in 1Q2021. In the preceding two quarters, successful auction sales, as well as a number of industrial properties sold outside the auction market, may have contributed to the increase, according to her.
There were 25 mortgagee-sale listings and 12 owner-sale listings out of the 38 industrial auction listings last quarter. As a result of these postings, Lee believes that forced and opportunistic selling are both taking place.
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