Industrial rents and prices post 12th consecutive quarter of growth in 3Q2023
Industrial rents and prices are up in 3Q2023, continuing their 12 consecutive quarter-long growth trend despite a contraction in the manufacturing sector’s contribution to the GDP and a decline in non-oil domestic exports. Statistics released by JTC at the end of October showed a 2% increase in the all-industrial rental index and a 1.4% rise in the all-industrial price index, both q-o-q. On a y-o-y basis, rental and the price indices rose by 9.3% and 6.2% respectively.
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Occupancy rates for industrial properties registered a slight fall of 0.2 percentage points to 88.9%, with new supply outstripping demand. Although worries about the economy have led to companies pausing expansion plans, industrial rents and prices have been resilient, in large part due to a persistent supply crunch in the logistics and warehouse segment.
Rents for the multiple-user factory segment grew 2% q-o-q, with single-user factories and business parks up 1.9% and 1.2% respectively. However, the same segment saw a deceleration in rental growth in 3Q2023 from the 3% q-o-q increase recorded in 2Q2023, with the number of tenancies in the segment declining from 2,522 in 2Q2023 to 2,461.
Furthermore, prices for multiple-user factories rose at the slowest pace in the last eight quarters (1.1% q-o-q). High financing costs likely contributed to the slower price growth. Industrial prices continued to grow at a slower pace compared to rents in 3Q2023, indicating investors’ caution due to uncertain economic times.
Head of Research at Knight Frank Singapore, Leonard Tay, believes that there are early signs of the manufacturing sector’s eventual recovery, even though businesses remain cautious. He highlights that business sentiment for the sector is positive and that the Singapore Purchasing Manager’s Index registered an expansion in September. Meanwhile, the manufacturing sector was reported to have grown 0.2% q-o-q.
JLL’s Executive Director, Logistics and Industrial, Singapore, Tan Boon Leong believes that industrial rents may see full-year gains of around 8% to 9% in 2023, while price growth may moderate to around 5% to 6%. He adds that growth for both rents and prices are likely to extend into 2024.
CBRE’s Head of Research for Singapore and Southeast Asia, Tricia Song, believes that occupier sentiment will remain cautious as the weak manufacturing outlook continues, with high rentals and increased supply expected in 2024.
Despite the gloomy outlook, there are signs of improvement in the industrial real estate market, largely due to government measures and increasing digitalization which has seen the sector remain resilient in the face of challenging global economic conditions.