SINGAPORE - How does one combat rising industrial property prices?

Various options have been tossed on the table.

Companies, for example, could make better use of their land space.

Tan Boon Leong, director of industrial services at Colliers International, noted how one company (Soon Hock Container & Warehousing) is building a container depot on the rooftop of its new hub in Tuas instead of taking up the entire ground level just to store the containers; this leaves space available for warehousing purposes.

The government's introduction of shorter, 30-year leases has indeed helped to ease some cost pressures, some analysts said.

Lim Kien Kim, head (industrial) at Knight Frank said this is because the absolute sum for buyers is lower.

But he sees little impact on rents as tenants will pay what they are prepared to regardless of the length of the property's lease.

Chua Chor Hoon, DTZ's head of Asia-Pacific research, noted that if these new measures are built to appeal to investors rather than meet the needs of end-users, they could result in developers strata-subdividing the sites for sale.

"Then there will be a supply-and-demand imbalance, which will drive rents up for space that meet industrialists' needs, while those that do not meet their needs end up with unauthorised uses, or worse still, are vacant."

"If the short-tenure sites were to be developed with many small units, albeit meeting the minimum 150 square metres, and if these strata unit prices are close to prices of 60-year leasehold units, then more measures will be warranted." 

Responding to this, a Ministry of Trade and Industry (MTI) spokesman said the government has imposed technical conditions on the Industrial Government Land Sales programme since the first half of the year to ensure that private developers meet the needs of SMEs.

These include getting them to build industrial space of a minimum unit size and requiring a minimum number of large factory units at some sites.

A review of what constitutes correct usage under current zoning requirements has also been suggested by some analysts.

Knight Frank's Mr Lim said a lot of manufacturing services, such as trading or administrative support, do not qualify as authorised users of industrial property under current regulations.

He hopes these can be included given the fact that the manufacturing landscape has shifted from direct production to manufacturing services.

MTI said it has received feedback that industrialists are increasingly moving their lower value-added manufacturing activities offshore while engaging in higher value-added ones, including some manufacturing-related services, in Singapore.

It recognises that the uses of industrial land are evolving and regularly reviews if industrial space meets the needs of industrialists.

"At the same time, we will continue with our enforcement efforts to ensure that industrial space is not misused by non-industrial users."

Some companies have called for a reversal of industrial property divestments by JTC Corporation to private developers.

MTI said JTC made the decision to exit the generic multi-storey, multiple-user factory space segment in 2005 as its tenants were paying lower rents in a competitive market, "which was inequitable to non-JTC tenants".

The spokesman added that the government understands there may be concern about industrial real estate investment trusts' influence on rentals.

"Industrial Reits form part of the competitive rental market where no single player should have the market power to influence rentals significantly. The government will not hesitate to intervene if we see evidence of collusion or abuse of market dominance by the Reits."

NTU's Assistant Professor Leong Kaiwen said: "From 100 per cent of focus groups I have conducted, everybody has said that JTC is the best landlord compared with the real estate investment trusts."

"So they really want the government to consider this and, if possible, go back to the old model."