Industrial properties in Singapore have in recent years become an investment instruments for investors looking to obtain further diversification away from residential properties. However, as with different types of investment instruments, there are things that people need to know about it before investing.
Here are 6 nuggets of information about industrial properties that you absolutely need to know about before looking to invest into it.
1. Type of Industrial Buildings
Industrial buildings are categorised as Business 1 (B1), Business 2 (B2) and Business Parks. Typically, manufacturing, assembly, R&D, warehousing and workshops are all considered as activities to be housed within industrial building or factories.
B1 spaces are for industries that do not require more than 50m nuisance buffers, whereas B2 spaces are for industries that require nuisance buffers of more than 50m, as classified by the National Environment Agency. Business Parks buildings are for non-pollutive industries.
It is important to know the different categories of industrial building that one is buying into because that would determine the type of businesses that are able to operate within it. The last thing you need is to be purchasing an industrial unit in a building expecting to rent it out to businesses from a certain industry, only to realize that they are not even permitted to operate within it.
2. Different tenure period
Industrial buildings per se are expensive; however, many strata-titled industrial units are affordable for individual investors with a price range between $500,000 – $1,000,000. Tenure period for industrial properties are usually either 30 years or 60 years.
Because of the shorter tenure, industrial properties tend to command a higher rental yield vis-à-vis other properties.
3. ABSD & SSD
The Additional Buyer’s Stamp Duty (ABSD) does not apply to industrial properties. However, the Seller’s Stamp Duty (SSD) does apply to industrial Properties if they are bought on or after 12 Jan 2013.
You might want to take note of the following rates:
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For industrial properties, there will be a 7% Goods & Service Tax (GST) charge that needs to be paid if buyers are purchasing their units from a GST registered entity. However, the GST paid is claimable if the buyer is also a GST registered entity.
5. 60:40 ratio
All industrial properties will need to set aside a minimum of 60% of the total floor area for industrial activities. This also means that up to 40% of the total floor area can be used for ancillary offices, showrooms and other communal space which supports the business activities.
This 40% non-industrial space can be useful for businesses. It allows them to set up their offices near where their industrial activities are taking place as opposed to renting elsewhere. To top it off, some of the newer developments such as Nordcom II at Gambas Crescent also provide sports facilities such as a swimming pool, gym and basketball courts.
If you think about it, having these amenities situated at your workplace can help your employees save quite a fair bit of money over the long run. It also helps promote work life balance, ensuring that they have convenient access to some exercise time even as they are working hard in the office.
6. Taxes payable
The property tax for Industrial properties is a flat 10% whether it is owner-occupied or tenanted. Like other investments in Singapore, there is no tax on capital gain.
Location is important
We want to end of by emphasising that as with all real estate assets, location is always a critical factor to consider. For industrial properties, it is important to ask yourself if the location that the building is in is one in which businesses will want to operate their industrial activities in.
A good example will be Woodlands. Located near to the Causeway, this up and coming town appeals to many businesses that get their supplies from Malaysia. Businesses that employ Malaysians within their workforce will also find the location convenient for their staff.
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