Industrial rental growth in 2024 to be confined to the logistics sector: expert

In 3Q23, rent for warehouse and logistics properties rose by 0.6% QoQ to S$1.62 per sq ft.

With tremendous external headwinds, coupled with new supply outpacing demand, experts expect industrial rental growth to remain flat next year.

Savills Singapore’s Executive Director for Research and Consultancy, Alan Cheong, added that rental growth in 2024 will likely be confined to the logistics sector.

“Even though industrialists may become more conservative and cautious with their rental negotiations and expansion plans, some industrial segments are expected to continue to outperform the rest,” Savills reported.

“Notably, new economy assets such as modern logistics, high-spec industrial and business park developments are poised to ride on the tailwinds of structural trends,” it added.

In 3Q23, prime industrial rents remained on an upward trend, with multiple-user factories and warehouse and logistics properties rising by 4.3% QoQ to $2.22 per sq ft and 0.6% QoQ to $1.62 per sq ft, respectively. 

The JTC’s rental index for All Industrial Property had also risen 7.1% YTD, with multiple-user factories and warehouses increasing by 8.2% and 6.8%, respectively.

Savills underscored that prime logistics properties are limited in supply and almost at full capacity, and the few new completions slated to come onstream by end-2025 have already achieved healthy pre-commitment rates.

“This might lend further support to the rental growth for modern warehouse facilities, especially those in good locations. High-spec industrial facilities and business parks with good amenities and accessibility are also likely to continue to see potential spillover demand from the current tight CBD office market,” Savills said.

In 2024, rents for multiple-user factory and warehouse spaces are expected to remain flat at a moderate pace amid the upcoming stream of supply, high operating costs and challenging
business conditions both abroad and locally.