The industrial property rental index posted its first uptick in four years, marginally increasing by 0.1% q-o-q in 2Q2019. The last time the rental index rose was in 1Q2015 when it climbed 0.4% q-o-q, says Tay Huey Ying, head of research and consultancy at JLL Singapore.
Meanwhile, the 2Q2019 JTC industrial statistics show that the island-wide occupancy rate remained unchanged on a q-o-q basis at 89.3%, but rose by 0.6 percentage points y-o-y. Overall prices of industrial space also remained relatively stable, and the price index fell by 0.1% q-o-q and 0.1% y-o-y.
The business park segment continued its firm footing, posting a second consecutive quarter of increase in occupancy rate, climbing 0.4 percentage points q-o-q in 2Q2019, and rent growth also increased 0.2% q-o-q. “Tech firms continued to gravitate towards newer business park and high-tech spaces for good amenities and cost savings,” observes Tricia Song, head of research for Singapore at Colliers International.
Grab has started construction of its $181.2 million built-to-suit headquarters in one-north, scheduled for completion in 4Q2020, while Google is taking up 344,100 sq ft in Alexandra Technopark, in addition to its existing space in the adjacent Mapletree Business City II.
For price trends, recent transactions, other project info, check out the Alexandra Technopark project details page
However, the warehouse segment recorded a 0.5 percentage points q-o-q fall to its occupancy rate to 88.7% in 2Q2019, as well as a 0.2% q-o-q fall in its rental index. This was despite a more active leasing market during that period which saw an increase in the number of rental records from 386 in 1Q2019 to 429 in 2Q2019, according to JTC data. “This signals that the segment could have been affected by the deterioration in manufacturing and trade performances,” says JLL’s Tay.
Looking ahead, the ongoing US-China trade tensions and a dimmer economic outlook this year are likely to place industrialists and businesses on a cautious footing. This will provide little impetus for rent growth in the immediate term, especially for the warehouse segment, she adds.
However, new industrial developments boasting higher specifications will remain highly sought-after as they cater to the needs of technology companies and those from higher value-add industries, Tay says. “Barring any unforeseen external shocks, the business park segment is expected to outperform the rest of the market in 2019, given the tight supply of quality business park space for lease for the rest of 2019.”
For the rest of this year, another 9.69 million sq ft of industrial space is expected to come online, and next year will see about 18.3 million sq ft being added, compared to the annual average of 14 million sq ft over the past three years.
Overall industrial rents are expected to fall 2% y-o-y this year, and fall by another 2-3% in 2020, says Dominic Peters, senior director of industrial services at Colliers.
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