A flurry of supply completions could also exert downward pressure on occupancy and rents, says Cushman & Wakefield.
EDGEPROP (SINGAPORE) - Industrial rents grew by 2.1% q-o-q in 3Q2022, accelerating from the 1.5% q-o-q growth in the preceding quarter, says the latest JTC industrial data released on Oct 27.
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This marks the seventh consecutive quarterly rental expansion and brings the total rental increase for the industrial market to 4.7% across the first nine months of this year.
The steadily rising rents attracted institutional investors who want to rebalance their property portfolio with higher-yielding assets. This supported an increase in industrial prices which rose 2% q-o-q in 3Q2022, up from a 1.5% quarterly increase in 2Q2022.
Meanwhile, industrial occupancy dipped marginally to 89.7% in 3Q2022 from 90% in 2Q2022.
The overall rents of the multi-user factory segment outperformed the other industrial segments, growing 2.4% q-o-q in 3Q2022. This segment was propped up by strong demand from Singapore’s manufacturing sector, which expanded for the ninth consecutive quarter, particularly in the transport engineering, general manufacturing, and precision engineering clusters, says Tricia Song, head of research at CBRE.
Catherine He, head of research at Colliers, attributes the rental growth in the multi-user factory segment to a growing demand for high-specification multi-user factories as occupiers look for office-grade industrial spaces near the city fringe.
Meanwhile, rents for single-user factories grew by 2% q-o-q in 3Q2022 while the segment's occupancy remained healthy at 89.8% during the quarter.
Warehouse rents grew by 1.9% q-o-q in 3Q2022, clocking the highest annual growth rate of 6% y-o-y, compared to the other industrial segments over the same period. But warehouse supply remains tight despite a slight softening in occupancy to 90.8% from 90.9% in 2Q2022 due to new supply outstripping new demand.
Overall, there remains a healthy demand for quality logistics and warehouse space, says Tay Huey Ying, head of research and consultancy at JLL.
More occupiers are also adopting a “just in case” inventory approach to mitigate against supply chain disruptions, Song adds.
However, leasing demand for warehouse space may taper in the coming quarters with a weaker manufacturing outlook and as consumer demand shifts to services from goods post-pandemic.
Overall industrial growth is expected to moderate in the near-term amid a weakening manufacturing outlook and global recession concerns. A flurry of supply completions could also exert downward pressure on occupancy and rents, says Brenda Ong, executive director of logistics and industrial at Cushman and Wakefield.
Barring a sharp global economic slowdown, demand and occupancy for industrial space to remain relatively healthy and stable for the rest of the year into 2023, says Song.
Lam Chern Woon, head of research and consulting at Edmund Tie expects warehouse rents to grow by 7 to 8% for 2022. Meanwhile, JLL’s Tay expects full-year industrial rents to rise by 6–7% and prices to rise by 7–8% in 2022.