Easier time for some landlords

Straits Times: Sat, Mar 10

COMPANIES that deliver goods and transport components to factories may be hurting from a slowing economy and rising costs, but another key sub-segment of the logistics industry is facing an easier time. These are the landlords of warehouse space, which rent out the facilities for the use of logistics firms. When times turn grim, some firms may actually need more storage space - as unsold goods can start piling up. While business for the sector's firms started to slow down in the fourth quarter of last year, rents contined to hold strong. Figures from the Urban Redevelopment Authority showed median rentals for warehouse space stood at $1.85 per sq ft per month, 13 per cent higher than the fourth quarter of 2010 and 33 per cent higher than the same period in 2009. 'The demand for logistics space has historically been shown to be resilient,' said DBS Vickers analyst Derek Tan, who covers some logistics real estate investment trusts (Reits). 'Even when business slows for firms, we won't expect them to cut back on space so soon. Even in bad times, people need space to store goods.' There is also tight supply for warehouse space, he said. This will change only in 2014 when more warehouses will be ready. Mr Daniel Cerf, chief executive of the manager of Cache Logistics Trust, a Reit which owns warehouses, said the logistics warehouse sector in Singapore is 'buoyant'. 'The occupancy rate has increased steadily over the years and hit a 17-year high of 94.3 per cent in December 2011,' he said. 'The Cache Logistics Trust portfolio of properties remains 100 per cent occupied.' He said warehouse space remains tight with the economy continuing to grow, albeit at a slower rate. A spokesman for Ascendas - which has logistics and distribution centres making up 23 per cent of its portfolio here - said that demand for logistics properties will generally be affected over the longer term by a slowdown in international trade. 'However, so far, demand for our logistics facilities in Singapore has been stable, driven by local consumption and from Singapore's position as a regional distribution hub,' the spokesman added. JONATHAN KWOK Source: The Straits Times