NATIONAL Development Minister Khaw Boon Wan put rogue industrial tenants and landlords on notice yesterday in his latest blog entry.
He said tenants are running some office and non-industrial activities in industrial buildings, looking for cheap rents by using industrial space instead of areas where they are supposed to operate.
The Straits Times has reported that shops, tuition centres and even churches were using these industrial areas because of lower rents.
For instance, Jalan Pemimpin's Clarus Centre houses five religious groups, including Hope Sanctuary, and tuition centre Twig. It is a similar scenario at Henderson Industrial Park, with non-industrial businesses like outfitter Costume City, travel agency Star Holiday Mart and Acts Baptist Church housed across both wings of Block 203.
The penalty for the unauthorised use of properties is a fine of up to $200,000 and/or jail for up to a year. Shops and offices should be located in commercial sites, such as in shopping malls, as this unauthorised use of industrial space could be leading to higher business costs.
Mr Khaw's post comes as many small and medium-sized enterprises (SMEs) and MPs are raising the issue of high industrial rents eating away at the bottom line of local firms and affecting their competitiveness.
Mr Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group, estimates that non-authorised tenants could contribute to higher rents in some areas and eventually price out genuine industrialists.
Mr Khaw said: 'The Urban Redevelopment Authority zones land to support industrial activities. The zoning helps to keep the industrial land cheaper than say commercial and office land, and thereby keeps our industries competitive.'
Industrial rent may be more than 30 per cent cheaper, SLP International research head Nicholas Mak said. For instance, while industrial rents can range from $1.50 to $3 per sq ft (psf), suburban office rents can range from $4 to $6 psf.
The proper use of industrial space includes manufacturing, warehousing and production. Certain types of e-businesses such as IT infrastructure and software development are also allowed.
There are exceptions. For instance, childcare centres and furniture showrooms are allowed within industrial developments as they support the main industrial activities if, say, parents need to leave their children at the centres. Broadly speaking, they may occupy about 40 per cent of the industrial development.
Industry observers say the rules should be enforced but tenants The Straits Times spoke to seem to be unclear about the rules.
The manager at Costume City, who declined to be named, believes the business is operating within the guidelines. About half the space is used as a showroom to rent out fancy dress costumes; the other half houses its office and warehouse.
esthert@sph.com.sg
Additional reporting by Yasmine Yahya, Gan Yu Jia and Yunita Ong
'Don't mislead buyers about units'
SHOEBOX factory units - between 50 and 80 sq m or from 538 to 861 sq ft - cannot accommodate genuine industrial activities, said National Development Minister Khaw Boon Wan in a blog posting yesterday.
The units may look cheap, and could tempt small-time investors scared off by high residential prices. But they could get a rude shock when they realise how small the units are.
The trouble with the so-called shoebox units is that there is not much in the way of industrial production possible in such a small space, experts note.
Mr Khaw said that those marketing such properties should make it clear to buyers that industrial units can be used only for industrial activities.
That tends to make it hard to find tenants, especially if the Government cracks down on illegal uses such as shops and tuition centres, experts add.
EL Development managing director Lim Yew Soon said investors make up about 30 per cent of buyers at his latest industrial estate, Eldix, in Mandai. Unit sizes start from about 1,600 sq ft.
Interest from investors has been growing ever since the Government slapped a series of cooling measures on the residential market, he noted. 'We always make sure that our buyers come in with their eyes open and will explain the restrictions of use to them. These restrictions are also listed in the sales and purchase agreement.'
Source: The Straits Times