Why A Shorter Lease Tenure is Now the New Norm for Industrial Properties
Shorter Tenure for New Industrial Properties Announced
Before 2012, it was not uncommon to see industrial properties with 60 years lease or more. However, since 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 launched its Industrial Government Land Sales (IGLS) programme for the second half of 2023 (2H 2023). There will be 5 sites in the Confirmed List and 3 sites in the Reserve List, with a total site area of 9.81 ha.
The tenure of most industrial land released by the government moving forward will likely continue to be in the 20-30 years leasehold range in the near future. 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.