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The prospects of Singapore’s industrial property market, excluding that for business parks, turned slightly bleaker despite declining supply, according to StocksBNB’s analyst Richard Leow.
“The tailwind for the sector is the tapering of supply of industrial space in 2018.”
But negative rental reversions are expected to persist for the remainder of the year in varying degrees across different real estate investment trusts (REITs), while absorption of vacant space remains sluggish with occupancy not picking up.
In addition, the city-state’s manufacturing and export figures are already easing, and the outbreak of a full blown trade war between China and the US could break the camel’s back.
Consequently, the analyst expects industrial rents to continue to slide until 2019. This is in contrast to StocksBNB’s prior forecast that rents would hit rock-bottom this year.
“We now do not discount the possibility for rents to continue downward into 2019, instead of bottoming by end-2018. Our belief stems from the continued weakness in the industrial Properties statistics from JTC, moderating of manufacturing and export data, and escalating trade tensions,” Leow explained.
Nevertheless, the Business Park segment bucked the trend, recording the fifth straight quarter of rising rent in Q2, and rentals are projected to be stable thanks to limited new supply.
“Singapore is evolving towards higher value-added manufacturing and there is a push with the Smart Nation initiative. We like REITs that can capture this opportunity with Business & Science Park properties and Hi-Tech/Hi-Specification buildings,” he added.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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