Industrial affected by supply chain disruption


  • Property
  • Saturday, 04 Jul 2020

Overhang issue: A total of 1,338 industrial property units valued at RM1.95bil are recorded during the first three months of 2020.

INDUSTRIAL property transactions were down year-on-year in both value and volume in the first quarter of 2020, as sentiment weakened amid significant supply chain disruption caused by the Covid-19 pandemic.

According to the National Property Information Centre (Napic), a total of 15,152 transactions worth RM3.19bil were recorded in the industrial property segment during the first quarter of this year.

This was down by 32.9% in volume and 23.7% in value compared with the first quarter of 2019.

A property consultant says the contraction was due to supply chain disruption and weakened sentiment amid the Covid-19 pandemic.

“Sentiment was already starting to get affected early in the year, with Covid-19 cases rising globally and the political uncertainties in February.

“The implementation of the movement control order in mid-March caused a supply chain disruption for retailers, which may have forced them to hold back or delay their factory or warehouse expansion plans.”According to Napic, a total of 94 units were completed in the first quarter or this year, down 67% from the 284 units completed in the previous corresponding period.

In terms of the level of overhang, a total of 1,338 units valued at RM1.95bil were recorded during the first three months of 2020.

This represented a 19.5% increase compared with the 1,120 units valued at RM1.87bil registered in the previous corresponding period.

Meanwhile, CBRE Research in a report on the logistics sector for Asia-Pacific in the first quarter of 2020 says industrial sentiment weakened across Asia Pacific in the first quarter of 2020, amid significant supply chain disruption caused by the spread of the Covid-19 pandemic.

“Manufacturing Purchasing Managers’ Index in Japan, South Korea, India and Singapore all fell into contraction territory. In China, PMI declined to an historical low in February but improved modestly in March, reflecting the quick resumption of industrial activity.”

CBRE Research adds that manufacturers across the region are facing substantial risks caused by the suspension of production in locked-down areas and a lack of shipping and transportation capacity.

“Overall warehouse demand remained firm in the first quarter of 2020, supported by resilient e-commerce demand and surging last-mile delivery requirements from companies selling fresh food.”

CBRE Research says exporters have been impacted by disruption to air and sea cargo networks, foreign exchange volatility and order cancellations.

“In Hong Kong, several occupiers postponed expansionary moves, while Singapore saw government agencies offer one-month rent waivers to industrial tenants and an uptick in requests from occupiers seeking more flexible lease conditions.”

It adds that Asia-Pacific logistics rents declines 0.1% in the first quarter of 2020.

“Melbourne (3% quarter-on-quarter) and Greater Tokyo (2.1% quarter-on-quarter) recorded steady growth amid solid leasing demand from companies engaged in the sale and distribution of daily necessities.

“Rents in Hong Kong fell by 3% over the quarter due to sustained economic weakness, while those in Singapore declined by 1.9% quarter-on-quarter owing to trade-related disruption caused by the spread of Covid-19.”

CBRE Research says tier one cities in China recorded steady rental growth amid tight availability, adding however that the gains recorded during the quarter were weaker compared with those in the previous years.

“Selected tier two cities in China such as Chengdu and Chongqing registered a decline in rents due to the large volume of new supply and stagnant industrial performance.”

CBRE Research says rents are forecast to decline further in the coming quarter as economic activity remains weak and more companies implement cost-saving measures.

“A recovery is expected in 2021 along with a rebound in the regional economy. Industrial capital values increased by 0.4% quarter-on-quarter in the first quarter of 2020. Prime industrial yield was largely stable across the region and is expected to remain so for the remainder of the year.

“The period saw solid investment demand for last mile logistics and cold storage facilities.”

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Industry , property , overhang

   

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