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Why 30 Years Tenure and Below is Now the New Norm for Industrial Properties

Why 30 Years Tenure and Below is Now the New Norm for Industrial Properties

Shorter Tenure for New Industrial Properties Announced

Before year 2012, it was not uncommon to see industrial properties with 60 years lease or more.

However, in year 2012, the Ministry of Trade and Industry or MTI announced that more sites with shorter tenure and smaller sizes will be released.

Since then, the land tenure for Industrial Government Land Sales or IGLS programme released has been capped at a maximum tenure of 30 years, which is down from the 60 years lease previously.

Reason for Shorter Tenure

With shorter land tenure of 30 years or less, industrial sites are expected to become more affordable for companies in Singapore that are involved in industrial activities.

This move will also help industrial property users who sometimes prefer to construct their own customised facilities to better suit their business operations and requirements.

The reduction in tenure for industrial properties also provides more flexibility for the government in terms of redevelopment of land while also making sure that industrial properties are kept at an affordable level for companies.

Also in recent years, some land tenure for land released under the Industrial Government Land Sales (IGLS) and zoned under Business 2 or B2 which is generally meant for heavier industrial usage come with 20-year leasehold tenures. These land that are being released are also generally smaller in sizes and usually have sizes of a hectare or less.

The move shows that the Government is looking to meet the demands coming from industrial property end users who really need the spaces for their business operations in Singapore as compared to investors or developers who would most of the time prefer industrial properties with longer leases.

It is usually also easier to land a mortgage with a bank for Industrial properties with longer tenure.

What to Expect in the Near Future

The Ministry of Trade and Industry (MTI) has recently, in June 2018 launched the Industrial Government Land Sales (IGLS) Programme. 

Confirmed List of 2nd half 2018 Industrial Government Land Sales Programme

According to the press release, the confirmed list of Industrial Sites for 2nd Half of 2018 are six Business 2 (B2) sites.

By having a closer look at list, we will notice that all the released sites which are located at Woodlands, Tampines, Tuas, Jalan Lam Huat (Kranji), Jalan Papan (Near Jurong Port) all have tenures of 20 years lease.

Although these are generally land that are smaller in sizes, there is a land plot at Jalan Papan which is near Jurong Port Area with the size of more than 1 Hectare (1.3 Hectare).

In the reserve list of industrial sites for 2nd half of 2018, we will notice seven B2 Heavy Industrial reserve sites namely in Woodlands, Corporation Drive, Gul, Tuas, Tampines, Gambas and Benoi. These properties have a mixture of 20 and 30 year leases with 20 years lease for sites that are 1 hectare or less while 30 year leases are for sites that are larger than 1 hectare.

Looking forward, tenure of most industrial land are likely to be in the 20-30 years leasehold range in the near future with reasons to meet the demand of genuine industrial property end users in Singapore. There are also some industrial property developers offering lease and buy back schemes to allow companies to consider their purchase while renting the factory or warehouse units for the initial few years.

Source : MTI