Singapore industrial space rents, prices continue to rise in Q1; occupancy falls: JTC

RENTS and prices of Singapore industrial developments continued to rise in the first quarter of 2022, although overall occupancy rates dipped, according to JTC's quarterly market report released on Thursday (Apr 28).

Industrial space prices rose 2.1 per cent on the quarter and 5.6 per cent on the year. Prices were up 2.3 per cent and 1.8 per cent quarter on quarter in the multiple-user and single-user factory segments, respectively.

Meanwhile, rents climbed 1 per cent quarter on quarter and 2.4 per cent year on year, led by gains in the warehouse sector on the back of robust demand for ramp-up facilities.

Colliers Singapore head of research Catherine He noted that this is also the strongest quarterly growth since Q3 2013. “Trade indicators have exhibited a similar trend, with expansion recorded in manufacturing output, NODX and PMI, albeit with growth moderating,” she added.

The warehouse sector saw a 1.5 per cent rise in rents in Q1, followed by the multiple-user factory segment which added 0.9 per cent and single-user factory segment which rose 0.3 per cent. Rents at business park spaces remained flat quarter on quarter.

Year on year, the warehouse segment saw rents rise 3.8 per cent, rents in multiple-user factory spaces rose 2.6 per cent, while rents in single-user factory spaces grew 1.8 per cent. Business park rents slid 0.3 per cent.

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The overall occupancy rate for the industrial property market fell to 89.8 per cent in Q1, down 0.4 percentage point from the previous quarter and 0.2 percentage point from the year-ago period. This was mainly due to new completions picking up significantly, and an increase in supply exceeding new demand.

CBRE South-east Asia head of research Tricia Song believes occupancies will bounce back in coming quarters due to resilient industrial leasing demand.

On top of strong demand for storage requirements amid supply chain disruption, Song expects renewed interest in the aerospace segment with further reopening of borders.

Total available stock rose by 333,000 square metres (sq m) compared with the previous quarter – the highest quarterly increase since 2019. In contrast, total occupied stock gained 71,000 sq m in Q1 2022 compared with the previous quarter.

As at end-March, JTC expects 2.4 million sq m of new industrial space to hit the market in the next 3 quarters of 2022. It projects single-user factory space to comprise 46 per cent of upcoming supply, multiple-user factory space to take up 28 per cent and the remaining 25 per cent to be from warehouse and business park space.

During the quarter, JTC allocated a total of 91,800 sq m of ready-built facilities (RBF) space to industrialists, which included 64,400 sq m of high-rise space and 20,300 sq m of land-based factory space.

Total RBF returns in Q4 2021 were 120,600 sq m, of which 50,800 sq m was high-rise space and 64,500 sq m was land-based factory space. About 88 per cent of total returns were due to natural expiries or companies consolidating their operations, JTC noted.

Looking ahead, JTC expects demand for industrial space to still be robust, barring any sharp slowdown in the global economy.

JLL Singapore head of research and consultancy Tay Huey Ying expects occupier demand for industrial space to stay firm for the rest of 2022, supported by growth industries such as the food, electronics, media, e-commerce, technology and life sciences.

“The global supply chain disruptions and geopolitical tensions could also lead to increased inventory holding and potentially stockpiling of essential items, which could underpin near-term demand for logistics/warehouse space,” Tay said.

Echoing the sentiment, Edmund Tie head of research and consulting Lam Chern Woon noted that increased stockpiling requirements will also drive the push towards supply chain diversification to mitigate cost pressures and operating risks as well as to strengthen manufacturing capacity.

“We expect corporations to consider diversification in other Asean locations such as Vietnam, Malaysia and Indonesia,” Lam said.

External forces exacerbating the global semiconductor supply crunch may also cause manufacturers to turn cautious when considering expansion activities, said Knight Frank Singapore head of research Leonard Tay.

“However, as e-commerce has proven sustainable, especially in this day and age where economies are steadily progressing towards being digital, the demand for logistics and warehouse space is expected to remain stable,” he added.