Industrial. Savills Research

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1 29 August 211 "The leasing market is expected to see more spillover demand from the office sector where rents have soared in recent months. Buying momentum is also expected to remain firm, underpinned by shifting investment interest from the residential sector." Image: Woodlands Bizhub The manufacturing sector contracted 5.9% yearon-year in Q2, mainly due to the volatile biomedical segment. Buying activity remained strong, with around S$1.1 billion worth of property transacted in Q2, 42% higher year-on-year. Ascendas REIT acquired Nordic European Centre for S$121.6 million. Cambridge Trust acquired 5 and 7 Gul Street 1 for S$14.5 million. Around 2.1 million sq ft of factory space was completed in Q2, including Rolls-Royce facilities and JTC s Business Aviation Complex, both at Seletar Aerospace Park. The quarter also saw the completion of the 352, sq ft Woodlands Bizhub which is understood to have been fully sold. The island-wide vacancy rate of factory space increased slightly from 6.9% at the end of Q1 to 7.1% at the end of Q2. Prices and rents of overall industrial space rose by 6% in Q2. The average monthly rents of prime flatted factories and warehouses tracked by Savills rose to S$1.7 to S$2.1 per sq ft in Q2. High-tech industrial rents strengthened to S$3.6 to S$4. per sq ft. Savills Research MICA(P) No. 42 / 2 / 211 Company Reg No D

2 Market overview The manufacturing sector contracted 5.9% year-on-year in Q2 after a 16% expansion in Q1, mainly due to a fall in biomedical output in April and May. However, the volatile segment quickly recovered in June with a robust double-digit growth. On the other hand, global demand for semiconductor chips remained subdued throughout the quarter amid mounting economic uncertainties. Buying activity remained strong, particularly for strata industrial units. properties have become an alternative investment choice amid spiking prices in the residential sector, coupled with rounds of cooling measures targeted at the segment. Around S$1.1 billion worth of property changed hands in Q2/211, 42% more than the corresponding period last year. This takes the total transaction value in 1H/211 to S$2.3 billion, refl ecting a year-on-year growth of 14%. Transaction volume and values, 2 Q2/211 2,5 2, 1,5 Q1 Q2 Q3 Q4 Transaction volume (LHS) Transaction value (RHS) No. of transactions S$ million 5, , The recent trend of developers rolling out smallish units has also boosted affordability. For example, unit sizes at Oxley Bizhub by Oxley Group and UB.1 by Sim Lian Group can be as small as around 9 sq ft. Brisk sales during the preview launch of North Spring Bizhub by Soil Build Group were credited to an affordable lump-sum quantum, with prices starting from S$478, for a 1,539 sq ft unit. REITs continued on their acquisition trail in 1H/211, although the majority of transactions were inked in Q1. Six properties with a total sales value of S$31.9 million were acquired in Q1. Ascendas REIT s S$125.6 million purchase of Neuros and Immunos in Biopolis topped all transactions in terms of quantum value. Also of interest are Cache Logistics Trust s S$39.8 million purchases of 4 Penjuru Lane and 6 Changi North Way, which are its maiden acquisitions since its listing in April ,5 4, 3,5 3, 2,5 2, 1,5 1, 5 The second quarter saw a slowdown in investment activities across all property sectors on the back of rising uncertainties and a volatile stock market. Only two industrial properties were acquired by REITs in this period; Ascendas REIT once again made a big-ticket S$121.6 million purchase of Nordic European Centre, while Cambridge Trust acquired 5 and 7 Gul Street 1 for S$14.5 million. This year s land tenders saw keen competition among developers due to their good locations in mature industrial estates, as well as proximity to existing or upcoming MRT stations. In Q1, a 3-year leasehold site at Kaki Bukit Road 4 drew a whopping 18 bids with a top offer of S$157 per sq ft per plot ratio (psf ppr). Another site at Ang Mo Kio Street 62 received 13 bids with a highest offer of S$17 psf ppr, beating market expectations of S$12 to S$13 psf ppr. The 6-year leasehold parcel is located near Yio Chu Kang MRT station and was the fi rst site made available in Ang Mo Kio in a long time. Despite a general market slowdown in Q2, a Business 1 White site at Irving Place near Tai Seng MRT station attracted 15 bids in June. The top bid of S$343 psf ppr was also much higher than the market expectation of S$2 to S$27 psf ppr. Other than the location attributes, the high number of bidders reflects developers confi dence in the industrial market, both in terms of leasing and strata-sales potential. The top bidder, Oxley Holdings, plans to build an upscale industrial project, similar to its nearby Oxley Bizhub, comprising strata industrial and commercial units. Supply, demand and vacancy Around 2.1 million sq ft of factory space was completed in Q2. The majority of space was single-user factories, including Rolls-Royce facilities and JTC s Business Aviation Complex, both at Seletar Aerospace Park (SAP). The latter was developed to provide warehouse space for aviation businesses and start-up space for new entrants to SAP. The quarter also saw the completion of the 352, sq ft Woodlands Bizhub, which we understand has been fully sold. The islandwide vacancy rate rose slightly from 6.9% at the end of Q1 to 7.1% at the end of Q2. Over 2 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. I 2

3 Supply, take-up and vacancy rate of factory space, 2 1H/211 16, 14, 12, 1, 8, 6, 4, 2, Net supply (LHS) Net take-up (LHS) Vacancy rate (RHS) ' sq ft % H/211 The warehouse segment also saw around 2.1 million sq ft of space entering the market in Q2. A notable completion is the 86, sq ft CWT Logistics Hub 3 at Tanjong Penjuru. Its proximity to Jurong Island, as well as Pasir Panjang Terminal, Brani Terminal and Jurong Port, makes the project an ideal logistics facility. The island-wide vacancy rate was up slightly from 7.2% at the end of Q1 to 7.7% at the end of Q2. Supply, take-up and vacancy rate of warehouse space, 2 1H/211 6, 5, 4, 3, 2, 1, Net supply (LHS) Net take-up (LHS) Vacancy rate (RHS) ' sq ft % H/211 Prices and rents Underpinned by strong buying activities, the Urban Redevelopment Authority (URA) price index for all industrial properties rose 6% in Q2 after an 8% gain in Q1. Recent launch prices reflect upbeat market expectations. For example, Oxley Group sold nearly 6% of the launched units at Oxley Bizhub over a weekend soft launch at an average price of S$677 per sq ft, setting a new benchmark in the area. 14% 12% 1% 8% 6% 4% 2% 16% 14% 12% 1% 8% 6% 4% 2% The URA rental index rose 6% in Q2, the same rate as in Q1. The average monthly rents of prime fl atted factories and warehouses tracked by Savills rose to S$1.7 to S$2.1 per sq ft in Q2, while high-tech industrial rents strengthened to S$3.6 to S$4. per sq ft. Price and rental indices, 21 Q2/ Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q Future supply Price index Rental index Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q At the end of Q2/211, an estimated 39.3 million sq ft of factory space and 7. million sq ft of warehouse space is expected to be completed between 211 and 215. Project name Location Gross floor area (sq ft) Estimated completion CleanTech One Nanyang Avenue 343, 211 UE Bizhub East Changi Business Park 496, 211 Avenue 1 West Park BizCentral A'Posh Bizhub Changi City Woodlands North Spring Bizhub Tanjong Kling Road 1,415, 211 Yishun Avenue 6/Yishun Street 1/ Yishun Street 23 Changi Business Park Central 1 Woodlands Park E5/Woodlands Avenue 4 Yishun Street 1/ Yishun Street , , , 212 1,253, 213 Woodlands 11 Woodlands Close 869, 213 Kaki Kaki Bukit Avenue 4 87, 214 Bukit Oxley Bizhub Ubi Road 1 938, 215 Over 2 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East. I 3

4 Outlook Downside risks have increased recently on the back of burgeoning sovereign debt in the US and eurozone. In addition, manufacturers are concerned over the appreciation of the Singapore dollar and rising labour costs which threaten to compromise their competitive position. The purchasing managers' index, which is based on anticipated factory orders, fell below 5 for the fi rst time in ten months in July. A reading below 5 indicates a contraction in manufacturing activities. On a brighter note, industrial properties could continue to see spillover demand from the offi ce sector in the short term, where high rents have prompted businesses to consider alternative locations, at least for some of their operating activities. Likewise, buying momentum is expected to remain fi rm, underpinned by shifting investment interest from the residential sector. We expect prices and rentals to grow moderately, between 3% and 5% over the next half of the year, and stabilise thereafter. For further information, please contact: singapore Christopher J Marriott CEO, South East Asia cjmarriott@savills.com.sg industrial, singapore Dominic Peters Director dpeters@savills.com.sg commercial, singapore Agnes Tay Director atay@savills.com.sg investment sales, singapore Steven Ming Executive Director sming@savills.com.sg research & consultancy, singapore Alan Cheong Associate Director alan.cheong@savills.com.sg research & consultancy, asia pacific Simon Smith Senior Director ssmith@savills.com.hk address Savills (Singapore) Pte Ltd. 3 Cecil Street #2-3 Prudential Tower Singapore T: F: corporate website This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particulars do not constitute, nor constitute part of, an offer or contract; interested parties should not rely on the statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy. No person in the employment of the agent or the agent's principal has any authority to make any representations or warranties whatsoever in relation to these particulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. This publication may not be reproduced in any form or in any manner, in part or as a whole without written permission of the publisher, Savills. Savills (Hong Kong) Limited. 211.

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