Melissa Tan | The Straits Times | Monday, Apr 29, 2013

SINGAPORE – Industrial property prices staged a comeback in the first quarter after a surprise dip in the preceding three months.

Office and shop prices also rose, which combined with rental declines to drive down yields in the commercial segment.

Prices of industrial property rose 4.5 per cent in January to March from levels in the previous quarter, the Urban Redevelopment Authority said on Friday.

The surge came despite the Government’s move to impose a seller’s stamp duty on the sector for the first time ever – part of a seventh round of cooling measures that took effect on Jan 12.

Multi-user warehouses saw the sharpest increase as prices shot up 10.6 per cent in the first quarter to hit a new high, partly because of limited supply. The rise exceeded the steep increase of 9.4 per cent already recorded in the fourth quarter of last year.

Multi-user factory prices grew 2.9 per cent in January to March after declining 2.7 per cent quarter-on-quarter in October to December last year.

Another factor pushing up prices was the greater volume of sales for freehold and 999-year leasehold industrial property, said Colliers International’s director of research and advisory, Ms Chia Siew Chuin. These properties tend to be more expensive than units on shorter leases.

Commercial property prices also rose in the first quarter, albeit at a slower pace than industrial.

Prices of offices and shops both went up 2.1 per cent in the first quarter, after rising 0.3 per cent and falling 0.2 per cent respectively in the previous quarter.

More investors turned to commercial property after it ended up being the only segment left untouched by the Jan 12 curbs.

R’ST Research director Ong Kah Seng said the rise in shop prices in the first quarter reflected overheating in the strata shop segment, which could have prompted the cooling measures implemented near the end of the quarter.

On March 26, the Government imposed a minimum average size of 50 sq m or 538 sq ft for shops.

The price increases for both industrial and commercial property in January to March have compressed rental yields.

Within the industrial segment, multi-user factory rentals inched up 0.4 per cent in the first quarter, markedly less than the 3.9 per cent increase posted in the fourth quarter of last year.

In contrast, warehouse rents slid 0.2 per cent after jumping 6.8 per cent in the preceding quarter.

In the commercial segment, rents declined because an uncertain economic outlook and domestic cost pressures put a lid on many firms’ expansion plans.

Knight Frank said that though the commercial segment had been untouched by the latest measures, yield compression could limit the appeal of investing in commercial properties, particularly shop units that saw high transacted prices in the previous quarter.

Office rents continued to fall, slipping 0.2 per cent in the first three months of this year after posting a 0.3 per cent decline in October to December last year.

Still, analysts said office rents were showing signs of bottoming out and leasing enquiries picked up in the first quarter after a seasonal lull at the end of last year.

Major developments such as Asia Square Tower 2, Jem in Jurong, Nexus @ one-north, The Metropolis and Orchard Gateway are expected to add to the available supply in coming months.

As for shops, rentals dropped 0.6 per cent in the first quarter after rising 0.2 per cent in the preceding three months.

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