Relentless business rent rise to abate this year

Yes, it’s possible for business rents in the most rent-expensive country in the world to become somewhat cheaper.

The pace of rising rents for industrial-office (I-O) buildings; factories; cargo lift access warehouses and ramp access warehouses showed some easing in 2011: from 4.7% in Q1 rising to 5.4% in Q2 but falling to 2.2% in Q3 and further to 1.8% in Q4.

Colliers International’s Industrial Market Research & Forecast Report 4Q 2011expects this softening to continue this year and forecasts lower rents because of sluggish export growth.

Over the next 12 months, industrial property rents are projected to drop 4%. Industrial property prices, on the other hand, are projected to drop 6% in the next 12 months.

“Despite weakening external trade performance, the strong local retail sales translate into demand for warehouses,” said Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International.

“As some major corporations are seeking to outsource their logistics arm, a group of third-party logistics companies are searching quality warehouse premises in order to capture the growing demand. Thus, major owners of quality warehouse facilities experienced high occupancy in their portfolios.”

Industrial property prices rose in 4Q, with growth from 1.8% to 5.4% QoQ for factory, cargo lift access warehouse, ramp access warehouse and I-O buildings.

Simon said industrial property sales activity was restrained by banks’ mortgage lending policies.

According to the government statistics, industrial property yield was about 3.8% between September and November 2011, the lowest level since the early 1990s. Industrial property yield in the coming quarters is expected to see price increase pressure because of expanding risk premiums for acquiring industrial properties amid economic uncertainties.

Colliers International is a global real estate services firm with more than 12,500 professionals operating out of 512 offices in 61 countries. It has been ranked the world’s number two commercial real estate brand by the Lipsey Company and National Real Estate Investor magazine.