BY RENNIE WHANG
Straits Times
SINGAPORE'S main industrial landlord JTC Corporation has made sweeping changes to the way it compiles closely-watched data on the sector for the first time in 15 years.
The idea is to better reflect market trends to give tenants, buyers and sellers a more accurate picture of the industrial scene here.
The changes apply to the methods used by JTC to compile its Industrial Property Price Index and Rental Index. They now take in a broader sweep of industrial properties across the island.
The old indices tracked prices and rents for multiple-user factories and warehouses, but the new price index will also track single-user factories. The new rental index will track single-user factories and business parks as well.
And where the old indices for multiple-user factories included only transactions in the central region, where most of these factories were located in the 1990s, the indices will now cover transactions islandwide.
Said Mr Leong Hong Yew, JTC policy and research director: "With (JTC) ramping up supply and opening more areas, in the east and west for multiple-user factories, for example, there was the need for revision... to represent true market movement."
The old methods did not account for property attributes affecting prices and rents, including location, remaining tenure and zoning, and used a 12-quarter moving average weights system.
As a result, index movements could have been caused by changes in the quality of buildings, for instance, rather than true price or rental movements, said Mr Leong.
In contrast, the new approach groups properties with similar attributes and uses fixed weights in the computation of the indices.
The new methodology - which took about a year to develop and test - is being used for JTC's market report for the fourth quarter of last year, which was released yesterday. It found rents of industrial space fell 0.6 per cent quarter-on quarter, and by 2 per cent for the year, in contrast with its average annual rise of 7 per cent over the past four years.
The fall in rents was in line with a dip in the islandwide industrial occupancy rate, which fell 1 percentage point to 90.9 per cent in the fourth quarter. Industrial property prices fell 0.1 per cent, but rose by 3.5 per cent for the year.
JTC noted that this was still lower than the average annual price rise of about 14 per cent over the past four years.
JTC also said yesterday that industrial rents could fall. About 2.6 million sq m of industrial space is expected to come onstream this year, with 2.2 million sq m next year.
The year ahead is expected to be a market for buyers and tenants, with average prices falling by 4 to 8 per cent and average rents dropping 5 to 10 per cent, said Mr Nicholas Mak, SLP International executive director.
With an uneven global recovery likely to weigh on Singapore's manufacturing sector, industrialists are expected to remain cost-sensitive and may take longer to evaluate their business space needs, added Ms Chia Siew Chuin, director of research and advisory at Colliers International.