Rules on Investing in Industrial Properties

Mr Speaker, Sir, there are currently no restrictions on the purchase of industrial properties by investors. Introducing such restrictions will have significant impact on businesses.

Not all industrialists want to buy industrial space. Some industrialists prefer a rental arrangement, which gives them greater business flexibility. Others may choose not to commit higher upfront financial resources to own their properties. MTI ensures that there is sufficient space for industrialists to either buy or rent industrial space.

Long-term investors play an important role in the business ecosystem. They rent out the space they buy to the users, the industrialists. Allowing investors to participate in the industrial property market provides options for our industrialists, reduces the upfront capital costs for businesses and keeps rentals competitive.

Thank you, Mr Speaker. The Minister mentioned that about 27% of the industrial land is bought by industrialists or private developers. Does the Ministry track what proportion of those that are sub-divided, strata-title factories that are developed by the private developers that are then sold as investment properties? Does the Minister track that level of data? If so, can we look at who are the buyers – are they the end-users or investors? Can we stop the investment portion of the whole process?

Sir, I wish to clarify that the data that I gave earlier is for multiple-user factory space. As the Member knows, the industrial space in Singapore is divided into several categories. One is the single-storey factory where JTC either sells or rents the land and the factory owner then builds his own factory. That constitutes 55% of our overall industrial land space. That is the bulk. Most of our big factories and some of our SMEs buy standalone, single unit factories. They can either rent or sell, and the price, as I mentioned earlier, is pegged to a competitive slate of international prices. So, we ensure that the land prices for space that JTC allocates are competitive.

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Of the overall industrial space, about one quarter is multi-storey factory space. That is the segment that JTC has decided that it would not own or rent out on its own. It would just sell the land, because there is a very thriving private sector market. As I mentioned in Parliament several times, even at the peak 10 years ago, JTC's market share of multi-storey, multiple-user factories is less than 20%. So there is no reason for JTC to be competing with the private sector. The data that I had given just now are for multi-storey, multiple-user factories, where REITS and developers constitute 27% of that segment.

Thank you, Sir. If we look at it in the whole scheme of things, that 55% of industrial land is owned by owners. Most of them are probably big multi-national companies or big companies. So, if we narrow down to SMEs who are operating in the remaining 20% or 25% of space that they now sublet, it would make a big difference to our SME community. I am very interested to know whether the factories that are re-sold – where they bought the land from Government, developed it, and re-sold some of the units built on the land to investors – is that driving up the rentals of industrial land for SMEs? If we can stop that perhaps we can reverse the trend.

Sir, maybe I did not make it clear in my reply. If you stop anybody from renting, and say that SMEs can only avail themselves of factory space only if they own it, that would be a very severe requirement. It would mean all SME industrialists, whenever they want to start their businesses, must make sure they have the financial resources to buy and own their premises before they can start. Today, they can have the option of renting, which means they lower their upfront cost. They do not have to put money into such a big asset, as buying their own premises. That is a very serious implication.

Sir, I wish to clarify. What I meant was that owning is one of it. But the other portion that I am requesting is, JTC becomes a landlord that rents out. What the Minister mentioned was that JTC was only controlling about 20% of it that has then been given to the private sector. I am asking for JTC to take it back – be the industrial landlord, and then rent these factories out to SMEs. In addition to that, there is also the portion of the re-sold factories that are driving rental prices up, probably because of the investment nature of the whole process.

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Sir, at the risk of repeating myself, we have gone through this debate several times. JTC has decided to take itself out of the market because 80% is done by the private sector, 20% by JTC. JTC tenants have a very unfair advantage in that they are getting subsidised rents from JTC. It is not a level playing field. By the Government's "Yellow Pages" rule, we had decided to get out. It has taken us several years to stage the divestment such that it has minimal impact on the sector.

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