Keeping Industrial Land Affordable for SMEs

Sir, last year, Singapore was rated as one of the top three most expensive places in terms of prime industrial land in the whole world, alongside Tokyo. This makes Singapore too expensive for companies, whether big or small, to remain competitive here. In this respect, I would like to ask the Minister the following questions.

First, the price of industrial land in Singapore has increased by 60% in the past two years – 2011 and 2012 to date – driven probably by investors speculating in the market. Does the Minister think that the 60% is good or bad for the economy? Secondly, in the last two years, what proportion of industrial land is held by foreign investors and what proportion of industrial land has been converted for non-industrial uses? Thirdly, on the release of additional land, as the Minister announced, does the Minister agree that releasing more land alone is not the answer if the land is allowed for investment purposes, versus direct allocation to end-users? In this aspect, should the Government not regain its old role as the major industrial landlord rather than giving out to private developers to be the landlord for end-users?

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Mr Speaker, as I mentioned in my reply just now, there are two things that we have to watch. One is industrial land rentals, and the other is industrial land prices. As Members can see, there seems to be a divergence. Land rentals have not increased as sharply as land prices. Land prices have gone up – as Mr Inderjit Singh said – very sharply over the last three years. But if we look at land rentals, they have gone up by 30% over the last three years. If we look at the longer period, land rentals have been very flat from 2002 to 2007. There has been a pick up since then.

When we look at industrial land, which is where the majority of our SMEs rent their premises, then we are watching very carefully. I do recognise that industrial land prices have gone up sharply. For us, we track our competitiveness very closely, in terms of our land prices and rentals, vis-a-vis alternatives in the surrounding countries and a suite of competitive locations. So, we continue to track and we continue to feel that our land prices and rentals are competitive, based on these competitive locations that we are tracking.

Next, the question on industrial land use. Industrial land cannot be converted to non-industrial use. This is something that is very clear. We have very limited land zoned for industrial use, and URA and JTC do not allow the land to be converted to non-industrial use. What I referred to was infiltration of non-industrial uses in factory space. As Members know, sometimes, in a factory, we allow a 60-40 rule, meaning 60% industrial use, and 40% ancillary use. Ancillary use means supporting services or offices that are related to the industry. Sometimes, there could be infiltration in the ancillary uses being sublet to other non-industrial users. On this, we are taking enforcement action and deterring people from allowing such non-industrial uses to creep in.

Sir, I also asked the Minister about the proportion of foreign investors who have invested in our industrial and commercial properties. As the Minister correctly pointed out, the land cost has gone up rapidly and maybe not rental. This seems to be driven by investors – foreign or local – who want to invest in industrial land for their own returns. They have moved from the residential property market to commercial and industrial. I think that is something that has to be controlled.

We are monitoring this. We do not have specific data for people to declare when they purchase industrial land, whether they are foreigner or local. So, we would have to start collecting the data. But as we all know, from anecdotal evidence – and this is the answer that I will give to the Member for the second question that he has filed – 60% of factory space that is rented out is used by industrialists who rent the space; 40% is owner-occupied, which means SMEs who buy the premises and then use it for their own purposes. For the 60% who rent, 15% or more comes from JTC and HDB; another 17%-18% comes from small owners, and the remaining 27% comes from the big developers or REITs. So, the Member can see that even if the foreign investments come in, they would be classified under the bigger owners – either REITs or developers – it is not a very big percentage.

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