Factory rents take a beating as economic growth slows

A supply glut isn’t helping.

Industrial landlords had a tough year in 2015, and things aren’t looking up in 2016. Data from DTZ show that average gross rents of first-storey and upper-storey conventional factory space fell by 4.5% and 5.7% for the whole of 2015 to $2.10 and $1.65 per sq ft per month respectively.

According to JTC’s statistics, net demand for multiple-user factories fell from 1.1 million sq ft in Q2 2015 to 872,000 sq ft in Q3 2015. 

The fall in demand for factory space was largely due to the weaker manufacturing sector arising from falling orders from the domestic and overseas markets. 

In addition, the fall in rents of multiple-user industrial space was also partially due to excess supply in the market. 

As at Q3 2015, the total supply for multiple-user factory space is expected to be 4.2 million sq ft in 2015, which exceeded the 10-year annual average demand by more than a million sq ft. 

Meanwhile, rents of business parks and hi-tech space also declined for the first time since Q3 2012 on back of generally weaker economic performance.

DTZ noted that with 1.5 million sq ft of lettable business park space expected to complete in 2016, companies will have more options to meet their business needs.

“As the manufacturing sector continues to perform below expectations, the industrial leasing market is expected to remain subdued in 2016,” DTZ said.