In 2Q2023, overall occupancy rate of industry property market saw a slight rise by 0.3 percentage points over the previous quarter, to reach 89.1%, according to information published from JTC the 27th of July. This growth was driven by the multiple-user factory as well as warehouse segments, with the new demand outpacing supply.
“Although many manufacturing clusters contracted in June the occupancy levels were helped by the demand from the transport Engineering cluster” says Leonard Tay director of research and analysis at Knight Frank Singapore. Tay adds that the demand of the cluster for warehouses to store inventory and other materials due to disruptions in supply chain logistics led to an 0.7 percent increase in the occupancy of warehouses to 91%.
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In a y-o-y perspective the industrial property occupancy decreased by 0.9% y-o-y. JTC credits this to an impressive pipeline of new constructions in the last year, with the total stock available increasing by 12.9 million square feet which was more than the 6.5 million square feet increase in the total stock occupied.
As a result of the growth in occupancy, the rents for industrial properties showed an increase of 2.1% increase q-o-q in 2Q2023. This is the 11. consecutive period of increase and rents climbed by a total of 14.5% from the trough in 3Q2020, says Tricia Song who is CBRE’s director of research Southeast Asia. But the growth is less in comparison to what the 2.8% logged in 1Q2023.
The rent increase was primarily due to the multi-user factory segment, that grew by 3% in the last quarter, and was and then the rents for warehouses that increased by 1.4% q-o-q. In a year-over-year base, rents for industrial increased by 9.4%.
The industrial property prices also increased during the quarter, gaining 1.5% q-o-q. Lee Sze Teck, senior director of data analytics at Huttons Asia, note that this is in line with the increase that was recorded in the 1Q2023 period. “The increase in prices appears to have stabilized since investors resisted rising prices in the face of a uncertain economic outlook and an enduringly high interest rates,” he comments. On a y-o – basis, prices grew in 6.9%.
In the month of June, approximately 6.5 million square feet of industrial space was scheduled to be completed by 2H2023. The upcoming supply of space is the factory space that is used for one purpose makes up around 60% warehouse space is 22% and 17.7% is made up of multiple-user factories and business park spaces.
In the future, JTC expects demand for industrial spaces to continue to grow despite the uncertainty of the economy. “Nevertheless the new construction continues to come in the occupancy rates are expected to remain fairly steady,” it states in its most recent quarterly report.
The Knight Frank’s Tay believes that the prices of industrial properties and rents will remain stable for the remainder this year. “As an edgy open, innovative and neutral business center, Singapore’s core values allow international companies to fly-to-safety and a quality destination for expansion and investment which can help grow as stability is restored in the world economy” Tay explains.
Lam Chern Woon, head of research and consulting at Edmund Tie, cautions that the manufacturing sector – that has seen its output decrease on a y-o – basis for the past nine months – from April June – has shown very little sign of stabilisation because businesses continue to struggle with rising inflation, as well as higher cost of finance and labour. “We expect trade tensions to increase and affect the world’s trade in 2024 in the event that the US is stepping up its rhetoric against China during the election year for the president,” he adds.
He is nevertheless optimistic regarding the warehouse industry, that he believes will generate an annual increase in rental of six% and 7%. This is backed by the shortage of high-quality warehouses and facilities, as and a rising demand. “Notably the growing need from 3PL (3PLs) businesses as well as life sciences and food manufacturing industries will play an important role in driving the need to increased the logistics process,” he says.
He also has a positive outlook for high-tech industrial areas and is backed by the latest set-ups by semiconductor and biotechnology firms and a steady interest from technology and life science occupants.