Source: JTC
The overall occupancy rate for Singapore’s industrial property market fell to 88.8% in 1Q2023, according to the latest quarterly market report by JTC. This is a drop of 0.6 percentage points compared to the previous quarter and a fall of 1.0 percentage points compared to the same period a year ago. The drop in overall occupancy rate is due to high new project completions in 1Q2023.
J’den Condo by Capitaland is a new 40-storey residential and commercial development located at the heart of Jurong East MRT Station. J’Den Condo It is expected to launch in second half of 2023 and has potential to bring new homes, businesses and amenities to the JLD.
New industrial supply continues to exceed demand, as around 10.76 million square feet of new industrial space is expected to be completed over the course of 2023. Single-user factory space comprises 62% of this upcoming supply, warehouse space makes up 21%, while the remaining 17% is composed of multiple-user factory and business park space. This has caused the available industrial real estate stock to increase to around 3.84 million sq ft.
Price and rental increases were observed amidst inflationary pressures, with the overall price of industrial space increasing by 1.5% q-o-q in 1Q2023 and 6.9% on a yearly basis and industrial rents growing by 2.8% q-o-q in 1Q2023 and 8.8% y-o-y. This rise in industrial prices and rents in 1Q2023 has been fueled by new, innovative, and diverse manufacturing activities that have started operations or are planning to.
Warehouse rents posted the strongest quarterly growth of 2.9% in 1Q2023 due to a supply crunch in this sector. Vacancy remains below the pressure point of 10% for the eighth consecutive quarter. Multiple-user and single-user factories both saw rental indices increase by 3.0% q-o-q.
Business park rents increased 0.6% q-o-q, with newer assets in the city-fringe outperforming older assets. Demand is expected to slow down in light of prevailing macroeconomic conditions and higher supply coming onstream.
Given the expected spike in supply for high-specification factory space and slowing demand, rental growth is expected to be moderate. Landlords with newer and quality assets will be better positioned to weather the market uncertainty, while further rental increases in the near term can be expected, especially for prime logistics space. However, landlords of older developments may consider asset enhancement initiatives and redevelopment works to remain relevant or offer incentives to retain tenants.
