Rental prospects for the industrial property market in Singapore are the strongest in the Asia Pacific region, according to a report by DTZ Research.

The real estate advisory company said prime industrial rental growth between 2011 and 2015 is forecast at about 5 per cent for Singapore.

DTZ noted that industrial rents were already up 5 per cent in the first half of 2011 compared to the previous year. It added that as a key hub in the regional trading network, Singapore, “is expected to record the best rental performance over the forecast period”.

Total returns of prime industrial property are expected to be in the region of 12 per cent over the next five years. This includes a capital growth component of about 5 per cent and an income returns component of about 7 per cent.

For the whole of the Asia Pacific region, overall industrial returns are expected to average 8.3 per cent per annum over the five years.

In comparison, Hong Kong is the weakest performer in the DTZ forecast of prime industrial markets. “Industrial demand is being undercut by cheaper locations in the Pearl River Delta, while scarcity of land is resulting in higher value usage replacing industrial space. Overall, the Hong Kong rental growth trend is flat,” DTZ said.

Rental growth for industrial properties in Brisbane, Gold Coast, Taipei, Melbourne, Shanghai and Sydney is predicted to be around 3 per cent per annum through 2015.

DTZ said Australia holds the top spot for the highest total returns market, led by Brisbane and the Gold Coast at around 13 per cent. “Double-digit annual returns, driven by high yields and steady rental growth, will be the norm in Australian industrial,” it added.

Hong Kong and Taipei are notable under-performers. DTZ said the cities are dragged down by expected negative capital growth. Total returns per annum in Hong Kong are forecast to be 2.9 per cent and 0.8 per cent in Taipei.

Source : Channel NewsAsia – 24 Aug 2011