Selling an industrial property is a significant decision, and timing plays a crucial role in maximizing its value. One of the most critical factors that impact the marketability of your industrial property in Singapore is its remaining lease. Here’s why selling your property before its lease drops below 35 years is the sweet spot.
Why Does the Remaining Lease Matter for Buyers?
In Singapore, most banks determine the maximum loan tenure for industrial properties based on two criteria:
1. Remaining lease minus 5 years
2. Up to 30 years, whichever is shorter.
This means that as the remaining lease of an industrial property decreases, the maximum loan tenure for buyers becomes shorter. For example:
• If your industrial property has 50 years remaining, buyers can secure loans for up to 30 years.
• However, if the lease drops to 34 years, the maximum loan tenure is reduced to just 29 years.
Shorter loan tenures increase monthly loan repayments for buyers, making the property less attractive, especially for businesses that need to manage cash flow.
The 35-Year Lease Rule: Why It’s a Game-Changer
When the remaining lease of your industrial property falls below 35 years, buyers lose access to the longest loan tenure (30 years). This can significantly impact:
• Affordability: Buyers face higher monthly repayments due to shorter loan terms.
• Market demand: Fewer buyers are willing or able to purchase industrial properties with shorter leases.
• Property value: Reduced demand often leads to downward pressure on property prices.
By selling your property before the lease drops below 35 years, you keep it attractive to buyers who are looking for longer financing options.
Benefits of Selling Before the Lease Drops Below 35 Years
1. Attract More Buyers
A property with a longer loan tenure option appeals to a wider pool of buyers, including SMEs and investors who rely on financing to acquire industrial spaces.
2. Maximize Sale Price
Properties with longer leases are perceived as having higher value, both for their usability and financing options. Selling early helps you avoid the depreciation curve that accelerates as the lease nears expiry.
3. Faster Sale Process
A property with financing flexibility is easier to sell, reducing the time it stays on the market. This is particularly important in a competitive industrial property sector.
Indicators That It’s Time to Sell Your Industrial Property
Here are some signs that it might be the right time to sell:
1. Lease is Nearing 35 Years
Once your property has about 36–40 years left on its lease, it’s time to start planning the sale. This gives you enough time to market the property and complete the sale before the 35-year threshold.
2. Declining Rental Demand
If rental yields are dropping due to competition or changes in industrial demand, selling early can help you avoid further losses.
3. Market Trends
Pay attention to market cycles. If industrial property prices are peaking or interest rates are favorable, it may be a good opportunity to sell and reinvest elsewhere.
What Happens if You Wait Too Long?
If you delay selling your industrial property until the lease falls below 35 years, you may face the following challenges:
• Limited Buyer Pool: Buyers who cannot afford higher monthly repayments may be excluded from purchasing your property.
• Lower Offers: Buyers will factor in the higher financing costs and may offer lower prices to compensate.
• Faster Depreciation: Properties with shorter leases experience accelerated depreciation, reducing their value over time.
Tips for Industrial Property Owners Considering a Sale
1. Monitor the Remaining Lease
Keep track of when the lease is approaching the 35-year mark. Consult with a property expert to assess the market and your options.
2. Engage a Professional Realtor
A realtor with expertise in industrial properties can help you navigate the sale process, market your property effectively, and find the right buyers.
3. Enhance Your Property’s Value
Consider making minor upgrades or repairs to ensure your property stands out in the market.
4. Stay Informed on Market Trends
Keep an eye on industrial property demand, rental yields, and financing trends to determine the best time to sell.
Conclusion: Sell Smart, Sell Early
If your industrial property’s lease is approaching 35 years, now is the time to act. Selling early ensures your property remains attractive to buyers, retains its value, and allows for a smoother transaction process.
By timing your sale strategically, you not only maximize your returns but also save yourself from the challenges of marketing a less marketable property in the future.
Need expert advice on selling your industrial property in Singapore? Let’s discuss how to achieve the best results for your property today!