RENTS of Singapore industrial space continued to rise in the first quarter of 2024, even as occupancy rates dipped and prices fell for the first time in three years, JTC’s quarterly market report released on Thursday (Apr 25) indicated.

Prices are expected to continue moderating and rents to ease, with slowing global growth and higher supply, said Catherine He, Colliers Singapore’s head of research. 

Rents were up 1.7 per cent, similar to the pace seen in Q4 of 2023, and 7.8 per cent year on year (yoy). Overall rental transaction volume was down by 9 per cent from the previous year.

Rental growth in Q1 was likely driven by higher rents sought by landlords for better-performing quality premises, noted Tan Boon Leong, JLL’s executive director for logistics and industrial. 

Single-user factory and business park rents rose the most – by 2.1 per cent in Q1 – while warehouses had a 2 per cent increase, and multiple-user factories recorded a 1.3 per cent change over the previous quarter. 

On a yearly basis, rents for multiple-user factories and single-user factories grew 8.9 per cent and 6.1 per cent, respectively. Warehouse rents rose 7.5 per cent and business park rents increased 5 per cent.

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“Supply continued to be tight this quarter, especially in the prime logistics space where there is no upcoming supply for the rest of the year. Third-party logistics (3PLs) and consumer products are the main demand drivers for warehouses,” said Colliers’ He.

Colliers expects more space to come into the market as some tenants downsize or relocate, together with higher supply completing in 2025. Occupiers may also opt to develop sites themselves or relocate to cheaper locations. 

“This will likely cause occupancy rates and rents to ease further (for the warehouse segment),” added He.

CBRE’s head of research for Singapore and South-east Asia, Tricia Song, observed that while some logistics occupiers have started to show resistance to higher rents, they remain keen to pivot away from traditional warehouses. 

“Landlords with prime logistics assets remain well positioned to capture demand from large-scale end-users such as 3PLs,” she added.

Prices for industrial space dipped 0.2 per cent compared to Q4 2023, in their first quarter-on-quarter drop in 13 quarters since Q3 2020, JTC said. 

Song added: “While investors generally expect interest rates to come down by year’s end, the uncertainty over the timing of these interest rate cuts could have dampened sentiment for some investors in Q1 2024. That said, yields for leasehold industrial assets remain attractive as they offer investors a positive carry.”

Huttons Asia’s senior director of data analytics, Lee Sze Teck, noted that prices in the single-user factory segment had dropped for two consecutive quarters. 

Yoy, overall prices were up 3.3 per cent, while transaction volume fell 2 per cent. 

Multiple-user factories saw 0.5 per cent growth, and prices were up 4.6 per cent compared to the year-ago quarter. Single-user factory prices declined by 1 per cent, and were 1.8 per cent higher against Q1 2023.  

Demand for multiple-user factories, especially those with higher-specification spaces, was driven by biomedical and engineering firms, albeit at a slower pace and with most tenants looking at smaller spaces of less than 10,000 square feet, said Colliers. 

“For single-user factories, there is a surge of supply coming on stream in 2024, though these are typically developed by the industrialists for their own use; demand in this segment has been supported by advanced manufacturing players,” added He from Colliers. 

“However, together with overall softer demand and leasing activity, rental and price growth for both types are likely to slow.”

Business park demand remains muted, with more renewals and occupiers right-sizing, said Colliers.  

The increase in business park rents was likely driven by “selected deals in premium spaces”, said CBRE’s Song, noting that median rents in one-north rose the most on a quarterly basis, by 16.3 per cent.

Overall occupancy fell 0.3 per cent in Q1 to 88.7 per cent, as supply increases continued to outpace demand. Compared to the year-ago period, the occupancy rate was 0.1 per cent lower.  

JLL’s Tan said the decline in occupancy was due to the doubling in net space additions from 65,000 square metres in Q4 2023 to 127,000 sq m in Q1, while the number of industrial tenancies fell to a 15-quarter low of 2,948 during the quarter.

As at end-March, the total available stock of industrial space stood at 53 million sq m. Total available stock rose by 0.7 million sq m, compared with an increase of 0.6 million in total occupied stock over the past year.

JTC expects 1.6 million sq m of industrial space to be completed in the rest of this year.

Another 1.6 million sq m of industrial space is expected to come on stream in 2025 and 2026. This points to an average annual supply of about 1.2 million sq m from now until end-2026, more than the 1 million sq m average annual supply injected over the past three years, and outweighing the average annual demand of 600,000 sq m. 

Colliers expects overall industrial rent growth for 2024 to moderate between 3 and 5 per cent, and put price growth at between 1 and 3 per cent.