Chart of the Day: Take a look at the massive industrial space glut that looms over Singapore

New space will reach 18 million square feet in 2H14.

A massive space oversupply is on the way for the country’s industrialists. The space glut is not welcome news, especially as the Urban Redevelopment Authority (URA) has recently launched its new 60:40 rule.

Under this new rule, 60% of the GFA is to be used solely for industrial activities, such as manufacturing, assembly, R&D, ancillary storage and ancillary warehousing. The remaining 40% may be used as ancillary offices, showrooms, neutral area and common facilities.

According to Chestertons, the influx of new industrial supply is expected to reach some 18 million sq. ft. in 2H2014 and another 18.5 million sq. ft. pa in next 2 years – well above yearly demand of 9.9 million sq. ft. per annum.

This graph shows that as of H1 2014, the take-up of multiple user factory space totaled 1.06 million sf while completions within the same period totaled some 2.76 million sf. With an additional 4.7 million sf of new multiple user factories completing by the end of this year, the full year supply is expected to hit an unprecedented level of 7.4 million sf.

Industrial vacancies have been inching up. While islandwide factory vacancies rose from 7.9% in end-2013 to 8.8% in Q2 2014, multiple-user factory vacancy saw an even higher increase. It reached 12.7% in Q2 2014, up from 11.4% in end-2013, and has returned to levels last seen in 2007.

“Delving into future supply numbers, the pipeline completions expected from H2 2014 – 2018 (Chart 3) totaled approximately 18.5 million sf or an average of 3.7 million sf pa. This poses a potential supply glut issue considering that the average annual take-up for multiple user factory space in the past 5 years (2009 – 2013) was about 2.27 million sf. As such, we can expect the multiple user factory vacancy rates to remain in double-digit territory as well as continue with it’s upwards trajectory up in the next two years,” stated the report.