You are here
Industrial space rents, prices continue to fall in Q3; occupancy rises: JTC
RENTALS and prices of industrial space continued to fall in the third quarter of 2020, latest data from industrial land and infrastructure agency JTC Corp shows.
Rentals of industrial space declined by 0.9 per cent quarter on quarter and 1.6 per cent year on year.
Prices slipped 2.2 per cent quarter on quarter and 3.9 per cent year on year.
However, the occupancy rate rose slightly by 0.2 percentage point on a quarter-on-quarter basis and 0.3 percentage point on a year-on-year basis to 89.6 per cent. The rise was driven by an increase in demand for storage amid a delay in new completions.
Among the segments, the occupancy rate for multiple-user factory space, warehouse space and business-park space all increased on a quarter-on-quarter basis, while occupancy rate for single-user factory fell marginally by 0.1 percentage point.
As at the end of the third quarter, there was 50 million square metres (sq m) of industrial space.
In the third quarter, due to the impact of Covid-19 on the construction sector, only 24,000 sq m of new industrial space was completed, the lowest quarterly completion on record and a significant reduction from the average quarterly completion of around 270,000 sq m in the past three years.
Based on approved plans as at end-September 2020, around 0.6 million sq m of new industrial space is expected to be completed in the fourth quarter of 2020. This is a sharp reduction from the 1.3 million sq m of new industrial space originally expected to be completed in the second half of this year, as reported in JTC's earlier Q2 2020 report.
Completion of 0.7 million sq m of new industrial space has been delayed to 2021 and 2022 due to the impact of Covid-19 on the construction sector. "We can expect further delays in completion for some industrial building projects, as project owners and contractors adjust to meet BCA's Safe Restart requirements," JTC said in its latest report released on Thursday.
It added that the rapidly evolving Covid-19 situation will continue to weigh on the industrial property market.
"There would be continued downward pressures on prices and rentals in the coming quarters, as well as construction delays for some projects. JTC will continue to monitor the market closely and support the needs of industrialists."
In Q3 2020, JTC allocated a total of 23,400 sq m of ready-built facilities (RBF) space to industrialists, which included 14,900 sq m of high-rise space and 4,700 sq m of land-based factory space.
Total RBF returns in Q3 2020 was 39,600 sq m, of which 26,200 sq m was high-rise space and 6,700 sq m was workshop space. “About 47 per cent of the total returns were due to natural expiries or companies consolidating their operations,” JTC said.
CBRE's head of research for South-east Asia, Desmond Sim, noted that the Covid-19 outbreak continued to place downward pressure on the industrial property sector in Q3 2020, as seen in the drop in rents for the third consecutive quarter. "Nonetheless, macro industrial indicators demonstrated positive blips – manufacturing output rose by 13.7 per cent y-o-y in August 2020 and non-oil domestic exports edged up by 5.9 per cent y-o-y in September 2020, while the purchasing managers' index expanded for the third consecutive month at 50.3 in September 2020."
He also noted that warehouse occupancy sustained its expansion from the previous quarter by 0.8 percentage points to 89.1 per cent in Q3 2020. "CBRE Research has similarly observed an increase in warehouse occupancy, underpinned by strong demand from e-commerce, third-party logistics and food logistics players. This is especially for prime logistics buildings, most of which are approaching full occupancy," said Mr Sim.
JLL Singapore's head of research and consultancy, Tay Huey Ying, said that notwithstanding the relatively healthy overall demand for industrial space, JTC’s islandwide rent and price indices of industrial space recorded their steepest q-o-q declines since 2017. "This could be partly attributed to uneven performances. In general, newer and higher specifications spaces (such as ramp-up warehouses and select city-fringe business parks) are outperforming their older and conventional counterparts in occupancies and rents," she added.