Net take-up of its ready-built facilities turns negative while prepared industrial land demand rises

(SINGAPORE) JTC Corporation has turned in a mixed report card for the second quarter in terms of demand for its industrial properties.

Net take-up of its ready-built facilities fell into negative territory from the previous quarter, while take-up of its prepared land rose.

Net allocation of ready-built facilities was a negative 2,700 square metres in Q2, down from a positive 9,400 sq m in Q1.

Higher lease terminations were the culprit. Businesses returned 27,200 sq m of space – more than double the 12,700 sq m in the previous quarter.

The manufacturing sector accounted for 80 per cent or 21,800 sq m of the terminations in Q2.

Also, close to half of the terminations, involving 13,400 sq m of space, happened as companies consolidated their operations.

Standard factories bore the brunt of this, as 14,700 sq m of space in such properties was returned.

Larger gross take-up could not make up for the higher terminations. Gross allocation of ready-built facilities was 24,500 sq m in Q2, up 11 per cent from 22,100 sq m in Q1.

Despite the negative net take-up, the occupancy rate for ready-built facilities remained relatively steady at 97.4 per cent in Q2, dropping 0.1 of a percentage point from Q1.

At end-Q2, JTC had four ready-built facilities under development. Two at Seletar Aerospace Park and one at CleanTech Park are due to be completed next year, and Fusionopolis Phase 2A should be ready by Q2 2013.

Separately, JTC’s prepared industrial land enjoyed a 5 per cent increase in net take-up, to 24.4 ha in Q2 from 23.2 ha in Q1.

A drop in terminations contributed to the improvement. Businesses returned 21.4 ha of land, down 43 per cent from 37.8 ha a quarter earlier.

Manufacturing-related and supporting industries contributed the bulk of terminations. Lower terminations boosted net take-up even as gross take-up fell. Gross allocation was 45.8 ha in Q2, slipping 25 per cent from 61 ha in Q1.

Jurong Island saw a surge in demand. Gross take-up there was 37.1 ha in Q2, more than two times the 16.2 ha in the previous quarter.

Source: Business Times, 19 Aug 2010

(SINGAPORE) Oxley Rising has emerged as the top bidder for a 3.5 hectare industrial site at Ubi Road 1.

The company, which offered $158.1 million or $169 per square foot per plot ratio (psf ppr) for the 60-year leasehold site, trumped 10 other bidders including Qingdao Construction (Singapore) and Sim Lian Holdings.

This is twice what analysts estimated the site could fetch when it was launched in June. Then, consultants reckoned that it could fetch $61-$75 million, or $65-80 psf ppr.

‘The overwhelming interest in the land parcel could be due to (Singapore’s) strong GDP growth of 18.8 per cent year-on-year in Q2 2010, driven by a 44.5 per cent year-on-year surge in manufacturing. This coupled with a robust take-up of 2.67 million sq ft of factory space in Q2 2010 could have created more interest in the land,’ said Li Hiaw Ho, executive director of CBRE Research.

Oxley’s top bid of $169 psf ppr was almost twice the amount of recent winning bids for industrial sites in Ubi that were awarded.

In fact, the last time that the $100 psf-level was breached for industrial land was in August 2009. Then, KNG Development paid $105 psf ppr for a 30-year leasehold site at Kaki Bukit Road 2.

And the only industrial land awarded under the government land sales programme for more than $169 psf ppr was a 30-year leasehold site that One Commonwealth now sits on. In November 2007, Chiu Teng Construction paid $170 psf ppr for it.

Oxley’s top bid was 8 per cent higher than the second highest bid, which was from Qing Quan and Qingdao Construction (Singapore).

The two companies put in a joint bid of $146.6 million or $156 psf ppr. Oxley’s bid was also 159 per cent higher than the lowest bid of $61.1 million or $65 psf ppr from Soilbuild Group.

The site has a land area of 375,150 sq ft and a 2.5 plot ratio, giving it a maximum gross floor area of 937,875 sq ft. It is zoned for ‘Business 1′ use, which means it can be developed for various uses such as clean and light industry – which includes computer software development, printing and publishing, assembly and repair of computer hardware and electronic equipment.

Mr Li said that the the breakeven cost for this development is estimated to be about $380 psf to $400 psf.

CBRE’s data shows that in the first seven months of 2010, upper floor strata-titled units in the 60-year leasehold Vertex, located along Ubi Avenue 3, sold for between $309 psf and $409 psf while the ground floor units sold for $371 psf to $550 psf.

Source: Business Times, 12 Aug 2010

JTC Corp seeks consultant to study sector involving over 3,000 companies

(SINGAPORE) Having already ventured underground, Singapore is looking at how it can further intensify the use of industrial land here. It will take a close look at the growing offshore and marine (O&M) sector, given the general shortage of sites, especially those with waterfront access.

JTC Corporation, which is seeking a consultant for this, says the study will cover a sector involving over 3,000 companies, broadly involved in two clusters: marine engineering (including shipbuilding, rigbuilding and ship or FPSO conversions) and offshore oil and gas exploration and production support services.

The feasibility study by the appointed consultant ‘will not just be restricted to existing oil and gas activities here, but also those that are currently carried out overseas and have the potential to be done in Singapore,’ the tender document said.

‘The purpose of the study is to establish the viability of intensifying land usage for these oil and gas activities,’ it added.

JTC’s land-intensification study – starting with the O&M industry and also for the aerospace industry – clearly marks a new phase in the corporation’s attempt to carve out more industrial space here.

It has already embarked on building underground projects, like for oil storage on Jurong Island, and possibly for science parks, and logistics and data processing centres later. JTC is also currently studying building very large floating structures for various industrial purposes.

Its latest study to intensify land usage for the O&M industry follows the planned development of a 13-hectare offshore marine support base at the new hockey-stick shaped Tuas View Extension area.

The support base, replacing an earlier one at Shipyard Road in Jurong, will cater to a strong pipeline of customers for waterfront land. All the earlier offshore suppliers there have since relocated to Loyang Offshore Supply Base in the east.

Construction of the Tuas View base is slated to start this month, with the multi-million dollar project expected to be operational by end-2011.

In line with its land intensification effort, the multi-user facility will provide common waterfront and berthing facilities for O&M companies involved in the manufacturing and fabrication of heavy equipment, components and structures, a JTC spokeswoman earlier told BT.

‘It is aimed at attracting new and quality types of manufacturing activities which will generate high economic value in terms of value-add and fixed asset investment,’ she added.

JTC said that while companies within the O&M sector have vastly different facility requirements, the sector nevertheless ‘shares certain common characteristics in terms of the space/land utilisation of its facilities, which is generally low’.

For instance, the sector commonly uses computer numerical controlled machines, which because of their weight and high-specifications require low-vibration and are usually located on ground-floor areas. Because most of their materials and products are heavy and bulky, these are also usually stored in the open or on the ground rather than stacked within warehouses.

The consultant will be required to study existing value-chain activities in O&M operations and come up with conceptual designs for each of the two industry clusters that can increase the plot ratio or reduce the land required. This includes the possibility of their having multi-tenanted buildings with shared facilities, among other solutions.

Source: Business Times, 5 Jul 2010

RENTS at industrial properties formerly owned by JTC Corp are likely to go up from June next year once a rental rise cap is lifted and a real estate investment trust (Reit) manager takes over.

The properties are held under the Mapletree Industrial Trust, which is headed for an initial public offering, possibly by the end of the year. Reits collect rent from tenants of the properties they own and pay most of it as dividends to unit holders.

Mapletree Investments, which bought the properties in 2008, had to face unhappy tenants struggling with soaring rents last year. Many had petitioned Mapletree for hefty rent cuts to cope with the tough market conditions then. Most of all, they were upset at having missed out on a 15 per cent rental rebate granted by JTC as part of the Government’s Resilience Package.

Many are small and medium-sized enterprises occupying the cheapest of the ex-JTC factories. And JTC rents are generally below market rates.

Property consultants had said that they cannot expect Mapletree to offer them the same low rates.

In any case, Mapletree had said that 1,448 of the industrial trust’s flatted and stack-up factories, as well as warehouses, would benefit from a 5 per cent rental cap – of JTC’s rent in July 2007 – when they renewed their leases before this month.

There is no cap for the remaining 108 – 7 per cent of the total – tenants in its business park buildings.

Mapletree Investments’ chief executive (Industrial) Phua Kok Kim said yesterday it has stuck to the rental cap. He said new tenants are signing leases at higher rates, which shows that the properties are ‘under-rented and there is potential for organic growth’.

But any rise is likely to be gradual, said Mapletree group chief financial officer Wong Mun Hoong.

Mr Phua added: ‘All our rents are subject to competitive market forces of supply and demand, so even when the rental cap of 5 per cent is lifted for non-business park space, the renewal rents will still be subject to market forces.’

Source: Straits Times, 1 Jul 2010

The plots, with total area of 19.92 ha, will be sold on 30, 45 or 60-year leases

THE Ministry of Trade and Industry (MTI) is offering 10 industrial plots for sale under the second-half 2010 industrial government land sales programme.

The plots, with a total land area of 19.92 ha, comprise three sites on the confirmed list and seven on the reserve list.

Five of the 10 sites are new – a 4.65 ha plot at Yishun Street 23/Yishun Avenue 9 on the confirmed list and plots at Woodlands Avenue 12, Tuas View Square, Kaki Bukit Road 4 and Ang Mo Kio Street 62 on the reserve list. The rest are being rolled over from the H1 2010 reserve list.

The government will sell all the plots on leases of 30, 45 or 60 years.

Colliers International director (industrial) Tan Boon Leong noted that all three plots on the confirmed list are zoned Business 2 use. ‘This will cater to strong demand for such sites as seen in the high number of bids for B2 land parcels last year.’

Sites zoned Business 2 can be put to a wider range of industrial use whereas Business 1 land is for clean and light use only.

Mr Tan highlighted the new reserve list plot at Tuas View Square as being relatively small for an industrial plot at just 0.44 ha and the Ang Mo Kio Street 62 site as the first plot the government has offered in Ang Mo Kio through its industrial land sales programme.

He also reckons that industrial land bids are likely to moderate in the second half of this year given the spread of sites that the government is offering.

Sites on the confirmed list are launched for tender according to a schedule. Reserve list sites are released only upon application by bidders.

In the first half of this year, the government also offered 10 industrial sites – two on the confirmed list and eight on the reserve list. Three of the reserve list sites were sold; they are located at Woodlands Avenue 12 and Yishun Avenue 6 (parcels 1 and 8).

The remaining five reserve sites have been rolled over to the H2 slate – two in the confirmed list and three in the reserve list.

Source: Business Times, 30 Jun 2010

Total site area of 19.92 ha up for grabs

The Ministry of Trade and Industry (MTI) has launched its Industrial Government Land Sales programme for the second half of 2010.

There will be three sites in the Confirmed List and seven sites in the Reserve List, with a total site area of 19.92 hectares.

The three sites on the Confirmed List are at Kaki Bukit Avenue 4, the plot at the junction of Yishun Street 23 and Yishun Avenue 9, and the land parcel at the junction of Old Toh Tuck Road and Toh Tuck Avenue.

MTI will also introduce four new sites on the Reserve List at Woodlands Avenue 12, Tuas View Square, Kaki Bukit Road 4 and Ang Mo Kio Street 62.

In addition, three sites from the first half of the 2010 Reserve List will be carried forward to the second half of the year.

Source: Today, 30 Jun 2010

RENTS for factories and warehouses turned around in the second quarter, rising for the first time since Q3 2008, DTZ said yesterday.

The property consultancy said the average monthly gross rent for first-storey private conventional industrial space was $2 per sq ft in Q2, up 2.6 per cent from Q1. The rent for upper-storey space was $1.60 psf, up 3.2 per cent.

According to DTZ, the average monthly gross rents for first and upper-storey private industrial space are down 14.9 and 22 per cent respectively from their peaks in Q3 2008.

Colliers International’s director (industrial) Tan Boon Leong also said rents for factories and warehouses edged up in Q2. ‘This is in line with the increase in factory orders, which in turn led to higher demand for industrial space,’ he said.

In May, Singapore’s manufacturing output surged 58.6 per cent year on year, driven largely by higher biomedical output.

Greater demand for industrial space has come mainly from higher-end manufacturers such as those in electronics and precision engineering, Mr Tan said.

He believes factory and warehouse rents will continue to rise in small steps this year, as manufacturers still need to utilise excess capacity carried over from the downturn.

DTZ has a similar view. ‘Industrial rents are likely to continue to increase but at a slow pace given the stream of about 15 million sq ft of private industrial space in the pipeline over the next one and a half years,’ said its South-east Asia research head Chua Chor Hoon.

The outlook for hi-tech industrial space is less bright. In Q2, the average monthly gross rent for business, science park and other space in this sector was unchanged at $3.15 psf.

DTZ does not expect hi-tech rents to move much this year, with a significant amount of business park space expected to come on stream in the second half.

There will also be competition for tenants from commercial space in secondary locations, said DTZ’s executive director (business space) Cheng Siow Ying. ‘The narrow rental gap between decentralised offices and hi-tech industrial space provides little impetus for upward movement of hi-tech industrial rents.’

Source: Business Times, 29 Jun 2010

The Ministry of Trade and Industry (MTI) has launched its Industrial Government Land Sales programme for the second half of 2010.

There will be three sites in the Confirmed List and seven sites in the Reserve List, with a total site area of 19.92 hectares.

The three sites on the Confirmed List are at Kaki Bukit Avenue 4, the site at the junction of Yishun Street 23 and Yishun Avenue 9, and the land parcel at the junction of Old Toh Tuck Road and Toh Tuck Avenue.

MTI will also introduce four new sites on the Reserve List, at Woodlands Avenue 12, Tuas View Square, Kaki Bukit Road 4 and Ang Mo Kio Street 62.

In addition, three sites from the first half of the 2010 Reserve List will be carried forward to the second half of the year.

Source: Channel News Asia, 29 Jun 2010

Rents for industrial space rose for the first time after falling from its peak in the third quarter of 2008.

According to DTZ Research, average monthly rents of first-storey private industrial space rose 2.6 per cent quarter-on-quarter to S$2 per square foot, while upper-storey space rose 3.2 per cent quarter-on-quarter to S$1.60 per square foot per month.

Rents for hi-tech industrial properties, however, were unchanged at S$3.15 per square foot per month in the second quarter of this year.

According to Chua Chor Hoon, head of DTZ’s Southeast Asia Research, industrial rents are likely to continue to rise but at a slow pace given the stream of private industrial space coming onboard within the next 18 months.

However, hi-tech rents are expected to be largely unchanged due to a large amount of business park developments expected to be completed in the second half of the year.

Source: Channel News Asia, 28 Jun 2010

JTC is working on innovative ways to create new waterfront resources

SINGAPORE wants to maintain its leadership position on the global marine and offshore landscape. And with this in mind, the city-state is meeting a key challenge – the scarcity of waterfront land – head on.

Industrial landlord JTC has been looking at innovative ways to create new waterfront resources. And through its efforts, the government agency plans to ensure the continued growth of the offshore and marine sector by bringing in new waterfront activities and allowing for expansion by existing players.

Singapore has been a big beneficiary of the strong worldwide high growth of the offshore and marine industry in recent years. An expert cluster of marine-related service companies – including those providing classification services, maritime law and insurance services and offshore support services – has developed here.

In 2008, Singapore’s marine and offshore industry output grew to $18.3 billion, which represents a compound annual growth rate of almost 30 per cent over the past five years. This makes the sector one of the fastest growing parts of Singapore’s economy in the past few years. The sector’s value-added in 2008 was $4.5 billion and the industry employed almost 70,000 workers that year.

Over the past few years, several world class global offshore and marine companies have either set up or expanded their operations in Singapore. They include Rolls-Royce from the UK, Halliburton from the US, Berg Propulsion from Sweden and Toll Offshore Petroleum Services from Australia.

Just a few months ago, Houston-based engineering Dril-Quip said it would develop a new $45.6 million facility at Tuas. this will handle all of the company’s manufacturing operations for the Asia-Pacific and Middle East.

To support these and other global companies in their Singapore ventures, Singapore plans to sharpen its competitive advantages to entrench itself as an offshore and marine hub of choice.

JTC chief executive Manohar Khiatani said during the ground-breaking ceremony for the Dril-Quip facility that given the importance of the offshore and marine sector, all relevant government agencies – the Economic Development Board, Spring, the Agency for Science, Technology and Research and JTC – have been working together to grow the industry in Singapore.

This includes continuing to attract expert players to set up here and channelling investments and resources to develop the entire value chain, which ranges from shipyards and component manufacturing to companies offering naval architecture and marine engineering services.

And in addition to all this, JTC is looking to address Singapore’s ever-present problem – a shortage of land.

‘For its part, JTC has been looking at innovative infrastructural solutions to overcome some key challenges faced by the industry,’ Mr Khiatani said. ‘One of these is to come up with innovative ways to overcome the scarcity of waterfront land in Singapore.’

The agency is creating resources such as a new offshore marine centre, multi-vessel berthing structures and an integrated shipyard. It is also finding new waterfront land for industrial use.

Offshore marine centre

JTC is developing an offshore marine centre at a 13-hectare site in Tuas View. The multi-user facility will provide common waterfront and berthing facilities for offshore and marine companies involved in the manufacturing and fabrication of heavy equipment, components or structures. This will come in handy, as demand for such facilities is growing, market watchers say.

Multi-vessels berthing structures

JTC is also looking at redesigning Singapore’s jetties to allow more vessels to berth along the same waterfront length.

The current system of using tugs for side-berthing will be replaced by a trolley and winch system to berth ships. This means that there will not be a need to provide navigational space for tug-boats, which JTC says can increase berth space along a waterfront by between 25 and 50 per cent.

‘The project will increase our potential to attract key investors from the oil and petrochemical industries who require waterfront infrastructure to support their business operations, thus strengthening Singapore’s position as a leading oil trading hub,’ JTC said.

Integrated yard facility

Singapore’s marine and offshore industry took a major step forward with the announcement in late 2009 that Sembcorp Marine will build an integrated yard at Tuas – the country’s first new-built yard in a generation.

The first phase of the 206 ha state-of-the-art yard is expected to cost about $750 million and to be completed by 2013.

The yard will boast a revolutionary design as well as the latest production technology and processes. As a result, land use will be optimised and supply-chain efficiency will be improved – achieving a jump in productivity, resource optimisation and operational synergy.

‘This first integrated yard is another example of how Singapore plans to stay at the forefront of the marine and offshore industry,’ said EDB chairman Leo Yip. ‘It will sharpen our competitive edge and reinforce our global leadership position in this industry.’

The increased flexibility that will come from cross-deploying workers and allowing them to multi-task will also improve and upgrade the quality of the work force here, JTC and EDB said.

Development of the 73.3 ha first phase of the yard will start next month and is expected to take four years. The remainder of the site will be developed in two more phases over 12 years.

When completed, the new yard will increase total dock capacity 62 per cent to 3.08 million deadweight tonnes (dwt), from 1.90 million dwt now, and will feature optimised docking and berthing facilities. An improved dock and quay ratio will ensure effective utilisation and faster turnaround for repairs and upgrading of ships, rigs and other floating structures.

The first phase will more than triple the land area from the current 20 ha, almost quadruple drydock capacity to 1.55 million dwt from the current 400,000 dwt and boost quay length almost three-and-a-half times from 1,071 to 3,408 metres.

Integrated facilities and newer technology will make the yard more efficient and productive, which will boost capacity and profitability, according to Sembcorp Marine president and chief executive Wong Weng Sun.

Mr Wong also expects productivity at the new yard to increase at least 15-20 per cent.

Utilising currently non-usable waterfront land

JTC has also earmarked a 40 ha site with around a kilometre of water frontage at Tuas West for future stock. Although the water depth here is only one to 3 metres – making it unsuitable for industrial activity – JTC is looking at the feasibility of improving this.

Looking ahead, land supply will continue to be a challenge to Singapore, JTC says.

And while land scarcity here is not new, the nature of the challenges faced by the agency has changed, which means it will work to come up with new solutions for the growing marine and offshore sector.

Source: Business Times, 22 Jun 2010