Demand plunges for JTC land and factories

Negative Territory - Return of JTC industrial land and factory space outstrips take-up rate. (PHOTO: JTC CORPORATION)

DEMAND for factories and industrial land hit new lows in the third quarter, with firms quitting their leases almost across the board and few takers for the vacated space.

The grim picture emerged in the third-quarter report by Singapore's largest industrial landlord, JTC Corp, which was released yesterday.

Industrialists, confronted with heightened uncertainty in the global economy, put off investment decisions or terminated leases because of poor business, said JTC.

As signalled by JTC's flash estimates released earlier on, demand for standard factories was the worst hit.

But yesterday's report showed these stark facts: JTC leased out only one such factory, while seven others were returned.

Of these seven that came back to the board, four were actually part of the landlord's en-bloc redevelopment programme.

Demand for this type of factory fell to its lowest level since the first quarter of 1999.

Net allocation - or space handed out minus that returned - plunged into negative territory, hitting a hefty minus 7,880 sq m.The take-up rate for prepared industrial land was another segment where terminations outstripped new take-up.

Net allocation fell to minus 11.4 ha, its lowest level in more than six quarters.

Flatted factory demand stayed positive by a whisker. Net allocation tumbled 63 per cent to 197 sq m - its lowest point in 11 quarters.

Activity in the secondary market for JTC's properties was also hit. Transactions fell for the sixth quarter in a row.

The only bright spot was JTC's incubator facilities which enjoyed a healthy take-up, as gross allocation rose 80 per cent to 900 sq m, said the landlord.

JTC said that amid the economic slowdown, no new projects were launched during the quarter, although buildings under construction were progressing as scheduled.

Property consultants said the weak performance was expected as the economy continued to head south.

"This has nothing to do with the Sept 11 terrorist attacks as the economy was already tracking downwards before that," Colliers Jardine managing director Dennis Yeo said.

He added it was prudent that JTC has halted churning out its factories as the demand for industrial space was undergoing structural changes.

"JTC may have to relook its supply assumptions because new industrialists are not going to use land like before," he noted.

The slackening demand is unlikely to bottom out until the second quarter of next year, consultants said.