Singapore Industrial Rents Rise for 11th Straight Quarter as Demand Grows

Industrial rents in Singapore rose by an average of 2.1 percent in the April through June period, compared to the preceding three months, marking the 11th straight quarter of increases in Southeast Asian city-state.

The continued upswing in rents during the period, which was reported in an industrial rental index published late last week by Singapore’s Jurong Town Corporation (JTC ), which regulates industrial property development in the city, was powered by a jump in the net amount of warehouses, workshops and other industrial facilities leased in Singapore, which boosted occupancy levels, according to analysts.

“Rent growth in 2Q23 came on the back of a steep expansion in net absorption amounting to 303,000 square metres – the highest in four quarters,” said Tay Huey Ying, head of research and consultancy for Singapore at JLL. “This was led by the multiple-user factory and warehouse segments which saw the 2Q23 island-wide multiple-user factory vacancy rate falling to a six-quarter low, and the island-wide warehouse vacancy rate staying at the sub-10 percent zone for the ninth consecutive quarter,” she added.

The increase in rents came despite a 1.3 percent contraction in the output of Singapore’s manufacturing sector during the second quarter, with all segments of the industrial market, including multi-user factories, single-user factories, business parks and warehouse reporting higher average leasing rates.

Rent Increases Taper

While rents continued their ascent, the JTC index showed the rate of growth tapering from the 2.8 percent increase achieved during the first quarter, compared to the final three months of 2022. Average industrial rents are now up 9.4 percent from a year ago and have risen by 14.5 percent since the last quarterly dip in the third quarter of 2020.

The positive net absorption pushed average occupancy rates in the industrial sector to 89.1 percent last quarter from 88.8 percent in the first three months of the year, according to JTC. With rents rising by an average of 3 percent, the multi-user factory segment recorded the strongest growth in the period as occupancy reached 89.9 percent.

Tricia Song, head of research for Southeast Asia at CBRE, noted that developers have rolled out some sophisticated new facilities recently, with the higher costs of leasing in those properties potentially influencing average rents in the multi-user factory segment.

“With several completions of high specification multi-user factories in central locations in H1 2023, average multi-user factory rents have trended upwards,” Song said in a research note, adding that some occupiers are jumping at the opportunity to secure better equipped facilities.

Warehouse rents rose by 1.4 percent in the second quarter, with that growth slowing markedly from the 2.9 percent upswing in the first three months of the year.

While e-commerce firms and growing storage requirements continue to support demand in the sector, Lam Chern Woon, head of research and consulting at Edmund Tie, pointed to a wave of about 315,000 square metres of new shed space entering the market next year as drag on rental growth for the rest of 2023.

Average leasing rates for business parks quickened to 1.3 percent last quarter after growing by just 0.6 percent in the first three months of the year, although analysts expect the rate of expansion will likely remain soft in the second half on the back of weak office leasing and a large volume of new stock coming online next year.

Shed Pipeline Grows

In the first six months of 2023 average industrial rents in Singapore rose by 4.9 percent compared to a year ago, when rates climbed 2.5 percent from the same period in 2021. Growth in prices for purchases of industrial facilities in Singapore, however, slowed to 3.1 percent in the first half compared to a year earlier, after climbing 3.6 percent during the first six months of 2022 on an annualised basis.

About 6.7 million square feet of new industrial space, an amount equivalent to around 1.2 percent of the existing stock in Singapore, is scheduled for completion during the second half of 2023, according to CBRE, and it is estimated that about 3.36 million square metres of industrial space will be completed between 2023 and 2026.

Despite that increase in supply, analysts see Singapore’s strong economic fundamentals continuing to underpin rents, at least in the near term.

“Industrial prices and rents should remain relatively stable for the rest of the year,” said Leonard Tay, head of research for Singapore at Knight Frank. “As a modern, neutral and innovative business hub, Singapore’s fundamentals offer international firms a flight-to-safety and flight-to-quality destination for investment and expansion that will facilitate growth when stability returns to the global economy.”