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Rents and prices of all industrial space in Singapore dipped by 0.8 percent and 1.6 percent respectively in Q2 2017 compared to the previous three-month period, according to JTC’s latest Quarterly Market Report.
Over the same period, occupancy rate slid by 0.7 percentage points to 88.7 percent, while total industrial space increased by approximately 0.6 million sqm.
“A combination of supply overhang and lacklustre demand continues to exert downward pressure on rents for most industrial property segments. As a result, vacancy rates of all industrial property segments except business parks rose in Q2 2017. Vacancy rates are slated to rise further, in tandem with the continuous injection of supply,” said Desmond Sim, CBRE’s Research Head for Singapore and Southeast Asia.
“Demand remains slow, as take-up continues to be mainly dominated by renewals and relocations. However, we continue to see active leasing enquiries, particularly from high-value manufacturing firms in the precision engineering and electronics sectors, and those with rising inventory requirements such as e-commerce and logistics players,” he added.
On an annual basis, government data revealed that rents and prices decreased by 4.1 percent and 8.2 percent respectively. Occupancy level also dropped marginally by 0.7 percent, while total industrial space surged by about 2 million sqm.
“JTC’s latest statistics showed that Singapore’s industrial property market remained weak in Q2 2017 with rents posting its ninth consecutive quarter of decline,” noted Tay Huey Ying, JLL’s Head of Research and Consultancy in Singapore.
“Nonetheless, it is worth noting that there are emerging signs of a slowing downcycle. For one, rental declines have stayed moderate at below one per cent per quarter for three straight quarters. Secondly, net absorption over the last one year has averaged 359,000 sqm per quarter. This is an almost 50 percent improvement over the 243,000 sqm averaged in the year prior.”
In the second quarter, all industrial property segments recorded weaker figures, except for business parks. On a quarterly and yearly basis, this sector posted a 2.1 percent and 2.0 percent growth in rents, while occupancy rate improved by 1.7 and 4.7 percentage points respectively to 85.7 percent.
“The brightest spot in the industrial property market remained the business park segment,” said Tay, adding that this sector would outperform the general market due to a lack of new supply in 2017.
Moreover, JTC noted that there were about 1,100 units in uncompleted strata-titled project that remained available for sale with a combined area of around 244,000 sqm at the end of second quarter.
Moving forward, the government agency expects around 1.4 million sqm of industrial space to be completed in 2H 2017, and another 1.1 million sqm by the end of 2018.
In comparison, the average yearly demand and supply over the past three years amounted to about 1.3 million sqm and 1.8 million sqm respectively. As such, JTC expects this to exert further downward pressure on occupancy rates, prices and rentals.
Likewise, JLL’s Tay believes that industrial rents will continue to be dragged down by the full-year net new supply of more than 2 million sqm, a number not seen since the 2.1 million sqm in 1997.
“Nonetheless, given the more upbeat economic outlook and moderating rental declines seen in 1H 2017, the full-year overall industrial rents could decline at a less pronounced pace than 2016’s 6.8 percent. This is barring any unforeseen external shocks,” he added.
This article was edited by Denise Djong.
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