Industrial rents, prices stabilise in 2Q2018

In 2Q2018, the occupancy rate of overall industrial property market fell by 0.3 percentage points compared to the previous quarter, according to JTC. Compared to a year ago, occupancy rate of overall industrial property market was unchanged. Prices and rentals of industrial space remained relatively stable for most market segments.

The price index of overall industrial property market remained unchanged while rental index fell marginally by 0.1% in 2Q2018 compared to the previous quarter. Compared to a year ago, the price and rental indices fell by 2.1% and 1.4% respectively.

Rents for multiple-user factories saw its first uptick in 12 quarters, increasing by 0.2% q-o-q. This was despite a 0.5 percentage point increase in vacancy rates, to 14.0%, says Brenda Ong, CBRE executive director of industrial & logistics services.

As the market is still adjusting to the excess new industrial space, rents for single-user factories and warehouses continued to decline albeit marginally, at -1.6% and -0.5% q-o-q respectively. “The softer industrial market has allowed cost conscious tenants to lock in lower signing or renewal rates,” says Ong. “Some large occupiers have commenced lease renewals much ahead of expiry. While most occupiers focused on consolidation, there were several occupiers who undertook expansion. Those in the semiconductor, petrochemicals, logistics trades were most active in expansion, albeit at a cautionary pace.”

The business park segment remained the top performer as rents strengthened for the fifth straight quarter to bring overall rental increase over five quarters to 7.5%, notes Tay Huey Ying, JLL head of research & consultancy for Singapore. This came as a consequence of steady demand, sustained growth in office rents and generally positive business climate.

As of 2Q2018, only the single-user factory and warehouse segments continue to record rent contractions, notes JLL.

“Despite growing demand for warehouses as a result of increased e-commerce activities, the influx of supply resulted in warehouse rents dipping by 0.5% q-o-q due to strong competition for logistics tenants," says Christine Li, Cushman & Wakefield's senior director of research. "Business park rents rose by 0.5% q-o-q on the back of sustained leasing activity amid limited supply coming onstream.”