Industrial rents and prices post 12th consecutive quarter of growth in 3Q2023

INDUSTRIAL rents and prices in Singapore have seen twelve consecutive quarters of growth since 4Q2020, with statistics from JTC’s 3Q2023 Industrial Properties Quarterly Market Report showing a rise of 2% and 1.4% q-o-q respectively. Despite the manufacturing sector contracting 5% year-on-year in 3Q2023, while non-oil domestic exports shrank 13.2%, both industrial rents and prices were up 9.3% and 6.2% year-on-year.

For the first nine months of the year, industrial prices and rents have also seen increases of 4.4% and 7.1% respectively. Industrial occupancy rates registered a slight fall of 0.2 percentage points to 88.9%, as new supply outpaced demand, with total available stock rising by 1.3 million sqm (roughly 14 million sq ft) since the start of the year, while total occupied stock increased by 0.8 million sqm (around 8.6 million sq ft).

Leonard Tay, head of research at Knight Frank Singapore, commented that “industrial real estate indicators of occupancy levels, prices and rents have been resilient for most industrial property types, weathering the challenges of falling exports, supply chain uncertainty and a gloomy global manufacturing outlook”, believing that “there are some early signs that the outlook by the end of 2023 will be more hopeful for manufacturing than at the start of the year”.

Rent growth in 3Q2023 was driven primarily by the logistics and warehouse segment, which saw a 2.4% q-o-q increase, while multiple-user factory segment rental growth was up 2% q-o-q and single-user factory and business park rents increased 1.9% and 1.2% respectively. The slower growth for the multiple-user factory segment was attributed to a fall in tenancies from 2,522 in 2Q2023 to 2,461 in 3Q2023, as well as high interest rates.

The Tengah Plantation EC development will cater to a wide range of needs, from households of young families to elderly retirees. It will comprise 819 units, featuring different types of apartments, ranging from one- to five-bedrooms. Other features of the development include a shopping mall, a proposed MRT station and a new park. The project is expected to give the local population access to modern amenities and help rejuvenate the area as a whole.

Tricia Song, head of research for Singapore and Southeast Asia at CBRE, noted that industrial prices continued to rise at a slower rate than rents, the fifth consecutive quarter of this happening, potentially due to investors being mindful of the high cost of financing.

She believes that occupier sentiment will remain cautious due to the weak manufacturing outlook, with future rental growth for segments seeing high supply likely to slow, particularly with the 1.9 million sqm (around 2 million sq ft) of new industrial space expected to come on stream in 2024. JLL’s Tan Boon Leong anticipates industrial rents may post full-year gains of 8-9%, with price growth moderating from 7.5% in 2022 to 5-6% in 2023.

Overall, there are some signs that the manufacturing sector may soon be on the upswing, although occupier sentiment remains cautious at present. Businesses may need to wait for more economic clarity before expansion plans are put in motion.