Landlords Saw Room For Upward Price And Rental Adjustments In All Industrial Sectors

Category: Finance, Real Estate.

In the first quarter of 2007 institutional investors continued to show strong interest in the acquisition of logistics facilities, with high levels of investment activity in Japan and China. In Japan, investor interest in distribution facilities continued to grow during the first quarter of 2007, with domestic and international investors both active in the sector.

Demand for industrial property or land remained buoyant in most Asian cities on the back of robust economies and sustained growth in the manufacturing sector. Mitsui Soko and recent entrant Mapletree Logistics Trust were among those making purchases. The quarter saw domestic logistics leasing and asset management firm J- REP announce plans to construct five distribution facilities over the next 12 months. At the same time, ProLogis and AMB remained among the most prolific developers of large, high- specification logistics facilities. Singapore saw increases in both rents and capital values of industrial property during the first quarter, with further appreciation expected. Landlords saw room for upward price and rental adjustments in all industrial sectors.

Developers displayed robust interest in the sector, purchasing four industrial development sites during the quarter at unit prices above those recorded in 200Though high- tech space continued to lead the sector, average factory rents rose after remaining unchanged throughout 2006 and the average rent for warehouse space increased for the first time since 200 In Hong Kong, demand for industrial space remained strong thanks to robust re- export activities and investors optimism about the local economy. However, completion of a number of upcoming office developments in East Kowloon will exert downward pressure on rents and prices in the industrial/ office( I/ O) sector. Industrial land prices in China appreciated further following the Central Government s introduction of minimum land prices and open market mechanisms for primary sales of industrial land in late 200The average price of Shanghai industrial land rose 2% q- o- q to RMB 874 psm( RMB 87 psf) , while the average rent of industrial facilities increased 5% q- o- q to RMB 35 psm( RMB 6 psf) per month. Investment activity was extremely brisk, with HK$ 5 billion in en bloc and site transactions recorded during the quarter. Three industrial land parcels in Shanghai were transferred by means of public listing for the first time under the new regime. The rise in land prices has not dampened industrialists enthusiasm about the Pearl River Delta, and the industrial market saw brisk investment and leasing activity.

The price of industrial land in Guangzhou similarly surged after the implementation of the new policies. In Beijing, logistics has emerged as the hot spot in industrial property investment, with a number of international logistics property developers and investors including AMB, ProLogis and Mapletree actively seeking suitable investment opportunities. Chengdu s industrial sector continued its rapid expansion in the first quarter of 200The first two months of the year saw 168 enterprises commit to entering Concentrated Manufacturing Industries Planned Areas. Investors have focused on mature industrial areas, including Shunyi Tianzhu in northwestern Beijing and Tongzhou Majuqiao in the southeastern city. In March, PetroChina announced that it would invest RMB 38 billion in an oil refinery and ethylene plant in Pengzhou, Chengdu. A number of MNCs are expanding their operations in the Philippines, with companies in the manufacturing and IT services sectors being the chief demand drivers.

The mega- project is expected to stimulate industrial property development throughout the Pengzhou area. Occupiers in a number of industrial zones are expected to be awarded a number of tax perks following new legislation. On the back of Hanoi s strong export and buoyant economic growth, the majority of the city s major industrial parks remained fully occupied, as demand has persisted in tandem with the growth in foreign investment. In Vietnam, the value of Ho Chi Minh City s industrial output continued to grow rapidly, registering a 12% q- o- q increase in the first quarter of 2007, although the rate of growth was lower than that recorded in 200The quarter saw the announcement of additional large- scale industrial projects, many involving investments by MNCs. In Thailand, recent events including the implementation of capital control measures and more stringent rules limiting foreign ownership of Thai companies continued to impact on sentiment in the industrial property market, leading to a drop in sales of serviced industrial land plots. However, the signing of a Thai- Japan free trade agreement in April 2007 provided some positive news to the market.

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