City fringe business park rents surge by 2.5% in H1 2021

Vacancy rates slowed down to 7.8% in Q2 compared to 9.9% in Q1.

City fringe business park rents increased by 2.5% in the first half (H1) of 2021, on the back of its vacancy rates falling to 7.8% in the second quarter (Q2) compared to 9.9% in the first quarter (Q1), according to a report by Cushman & Wakefield.

High tech rents rose by 0.3% in H1 amidst limited new supply whilst vacancy rates fell to 16% in Q2 compared to 16.3% in Q1.

Meanwhile, prime logistics rents grew by 0.9% in H1 as vacancy rates fell the most, from 22.4% in Q1 to 10% in Q2. Warehouse rents grew by 0.5% in the first half of the year whilst vacancy rates fell to 9.9% in Q2, from 14.7% in Q1.

According to Singapore Cushman & Wakefield’s head of research, Wong Xian Yang, the performance of the different segments within the industrial market is in tandem with the K-shaped economic recovery, with those catering to growing industries recording rent growth, whilst the others had limited growth or contraction in rents. 

He further stated that city fringe business parks, high-tech factories, and logistics which cater to biomedical, technology, high-value manufacturing, and e-commerce sectors have performed well with growing demand from pandemic thriving sectors, chasing limited available space amidst a supply crunch due to construction delays.

“On the other hand, outlying business parks continued to underperform, falling 1.8% in H1 2021. Average rents were pulled down by older developments that accounted for higher vacancies due to the relocation of anchor tenants to better locations or newer developments. Despite lackluster demand, factory rents held steady in H1 2021 amidst limited new supply,” Wong added.

For the second half of 2021, Cushman & Wakefield predicts that the K-shaped economic recovery will continue to characterise the performance of various industrial segments.

They said that prime logistics, city fringe business parks, and high-tech spaces will see continued demand as new economy industries, such as technology, high-value manufacturing, and bio-medical, continue to expand amidst digital transformation and higher focus on healthcare.

Meanwhile, niche sectors, such as cold chain logistics, food zone factories, and data centers, will continue to see strong demand due to limited stock and a lack of new supply.

Additionally, cold-chain logistics providers have heightened demand for spaces; many end-users have eagerly carved out cold storage spaces within their facilities for lease.

Cushman & Wakefield also observed that there are signs of broad-based growth for the industrial market towards the end of 2021 or early 2022, amidst vaccine rollout and as the manufacturing output in other sectors starts to recover. General manufacturing output has started to show signs of growth, with strong growth seen in recent months for the transport engineering and general manufacturing industries.

According to Cushman & Wakefield’s Executive Director of Logistics & Industrial Brenda Ong, she is optimistic about the outlook of the industrial market. "There are long-term tailwinds for the industrial market given Singapore’s position as a high-value manufacturing hub and her competitive advantages of a strong supply of talent, ease of doing business, infrastructure, and COVID-19 resilience."

"Singapore ranks high globally on the aforementioned factors, evidenced by strong investment commitments and expansions by several large [multinational corporations] across semiconductors, biomedical, and cleantech industries. This aligns well with Singapore’s recently-announced 'Manufacturing 2030' plan, a 10-year plan to grow Singapore’s manufacturing sector by 50% and maintain [gross domestic product] share of 20% by 2030," Ong said.