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Things You Must Know before Investing in Industrial Properties

Things You Must know before investing in Industrial Properties

1. Types of Industrial Properties

Industrial properties in Singapore are generally classified into different categories such as Business 1, Business 2 , Business Parks & Science Parks.

There are also some industrial warehouses and factories that are built to suit logistics operations, semiconductor firms etc.

Generally, manufacturing, assembly, warehousing and Research & Development (R & D) are considered as industrial activities.

Business 1 or B1 industrial spaces are generally zoned for clean & light industries, usually with only light manufacturing that do not require more than 50 metres nuisance buffers. The noise output from production is usually minimal and will not cause disturbance to neighbouring buildings.

This is why it is not uncommon to see B1 Industrial buildings located close to residential properties such as Housing Development Board (HDB), Executive Condominiums (EC) or Private Condominiums.

Business 2 or B2 industrial spaces are zoned for heavier industries that require nuisance buffers of more than 50 metres due to heavy manufacturing and production activities that may potentially cause noise or air pollution. These B2 industrial buildings are usually not located so close to residential properties for these reasons.

Business Parks & Science Parks are generally for clean industries that do not cause pollution.

It is important to identify & understand the different types of industrial properties available & its uses before purchasing or renting whether it is for rental yield or for own use as you would know which type of businesses are able and likely to operate within a particular industrial building.

2. Additional Buyer Stamp Duty & Seller Stamp Duty (ABSD & SSD)

Unlike the familiar Additional Buyer’s Stamp Duty applicable to purchases for residential properties in Singapore, the Additional Buyer’s Stamp Duty is not applicable to industrial and commercial properties.

However, you should note that the Seller’s Stamp Duty or SSD is applicable to industrial properties that are purchased on or after the 12th of January 2013.

If an industrial property is sold within the 1st year, SSD would be 15%, if sold within the 2nd year SSD would be 10% and 5% if sold within the 3rd year.

After the 3rd year, SSD would no longer be applicable.

3. Goods & Services Tax (GST)

For all industrial properties in Singapore, whether for sale or for rental, Goods & Services Taxes (GST) are applicable for buyers or tenants that are purchasing or renting their units from GST registered companies.

However, you should note that the Taxes are claimable if the purchaser or tenant also happens to be a GST registered company.

It is also possible to voluntarily be registered as a GST registered company depending on the company’s direction and whether it makes business sense.

For more information, you may refer to Inland Revenue Authority of Singapore’s or IRAS website.

4. Tenure of Property

Tenure of industrial properties are usually 30 years for newer industrial properties & 60 years in the past.

30 years have now become a new norm for new industrial properties, just like how 99 years is a new norm for residential properties as compared to 999 years or freehold.

5. Ancillary Office

For industrial properties in Singapore, if 60% of the unit floor area is being used for industrial activities, up to 40% of the unit area can be used for ancillary office usage, showrooms or approved supporting uses.

This 40% can be useful for supporting businesses as it allows businesses to be more efficient & productive by not having to travel to a separate office site all the time.

In recent years, there are also other industrial developments which encourage work & play concept.

Swimming pools, basketball court, sky garden and dining pavilions can now be found in certain industrial developments that are built with facilities. This is an interesting modern concept which promotes a better balance between work and life and at the same time offers better corporate image.

It is therefore crucial for one to understand the industrial property market & regulations so that you will be able to make a more informed decision by having the right fundamentals.