Industrialist may soon be forced to take up nearly 70% of the GFA (total gross floor area), a rise from the current 50%, if they become the main occupiers on any JTC land they choose to build properties on. This would mean that they would only be able to lease out 30% of their project space rather than the usual 50%.
On top of this is another change that affects those tenants who are renting any industrial space directly from JTC. These tenants will be barred from being able to sublet those spaces out.
Jurong Town Corporation clamping down on industrial subletting
October 1st is when these revised JTC subletting policies will start. However, they are allowing a grace period of 3 years, until the end of 2017, which will allow any existing tenants and those leasing to adjust to these new regulations.
Jurong Town Corporation has explained that it was necessary to set some limits regarding the maximum amount of space that could be sublet by a tenant. Space that has been allocated to tenants was done so on the understanding that it would be used for a tenants own productive needs, which means that they are the ones who need to occupy the larger part of their space.
On JTC’s website, it was stated that, after extensive consultations with industry associations and industrialists, a general agreement was made that 30% of a tenants total gross floor area should be sufficient enough for a company to use as a buffer to help deal with any business volume fluctuations.
Currently, tenants who have leased factory space from JTC directly are allowed to rent out areas of the property to other companies who are part of a business’s needs in keeping their synergy flowing. But now, JTC will be revoking permission to do this because the purpose is for tenants to be the ones who use the majority of that space. In situations where a tenant no longer needs some of that space, they have the option to renew their tenancy agreement for a smaller amount once their current term has ended.
Subletting to cease to encourage long term business use of Industrial Space
The purpose of this latest move by JTC is to develop a more productive and responsible use of industrial land that is already scarce there. It is also meant to encourage industrialists to only purchase or lease the amount of space they truly need.
JTC further pointed out, in a recent statement to BT, that the way current policies for subletting have been used has allowed for situations where a tenant has become a landlord in some respect and whose business has focused on using subletting as their main stream of income.
JTC further states that any third party or end user facility providers, like Reits, as well as developers will be allowed to sublet 50% of their total gross floor area to sub-tenants who are non-anchored. They will be allowed to so this within 5 years of them acquiring their TOP. It will be only after this when the 30% restriction will be applied.
There are 2 main criteria that JTC will also require of mainstay tenants:
- They must occupy at least 1,500 square meters
- They must meet the requirements set out by JTC for skilled worker profiles, compensation per worker and value added per square meter of space being occupied.