Expect industrial rents to fall in 2018

Rents dipped 2.8% YoY in Q4, following a pattern of recent decline.

Industrial rents dipped 2.8% YoY in Q4 and are expected to decline further in 2018, as 1.6 million sqm of factory and warehouse supply is expected to be completed, Cushman & Wakefield (C&W) said.

According to JTC's quarterly report, rents in single user, multi-user and warehouse rents falling 2.6%, 2.8% and 5.7% respectively. Business park rents were the sole outperformer, rising 3.3% in 2017.

On a quarterly basis, both single and multi-user factory space saw rental declines of 0.8% and 0.1% respectively. Warehouse space also declined by 1% QoQ. Business park space rents continued to increase for the third consecutive quarter, rising 2% QoQ in Q4.

C&W said the pace of rental decline has slowed as industrial rents fell only 2.8% in 2017, compared to 6.8% in 2016.

C&W research director Christine Li said, "With the economic growth expected to firm in 2018, we could see rents start to stabilise towards the end of 2018."

Here's more from C&W:

Business park rents could potentially increase further, underpinned by low incoming supply over the next two years. The supply of business park space remains limited, with only 0.7 million square feet slated for completion annually over 2018-2019.

This is in contrast to the historical 10-year annual average supply of 1.4 million square feet. Business park demand will be sustained by cost-conscious companies who do not need to be located in the CBD.

With future supply remaining limited, rents for quality business parks in the city fringe are projected to rise by 3% per annum, whilst rents for business parks in outlying areas are expected to increase by a smaller 1-2% per annum.