Industrial space prices and rentals rebound in Q4 2020: JTC

This is due to the rise in occupancy rates during the period.

Prices and rental indices for industrial spaces went up in Q4 2020 by 1% and 0.1%, respectively, after experiencing a fall of 3.7% and 1.6%, respectively, over the first three quarters, according to the data by infrastructure agency JTC Corporation.

Over the whole 2020, however, price and rental indices still fell by 2.7% and 1.5%, respectively.

The rise in the quarter came as the occupancy rate climbed 0.3 percentage point QoQ to 89.9%, driven by an increase in demand for storage amidst delays in new completions.

Nearly all industrial spaces reported a QoQ increase in occupancy rate over the same period, except for single-user factory which was flat at 91%.

Moreover, the total available stock in Q4 rose by 38,000 square metres (sqm), slower than the average quarterly increase of 188,000 sqm over the past three years. The 357,000 sqm increase in available stocks for 2020 was the lowest yearly increase since 2005.

JTC mentioned that about 2.7 million sqm of new industrial spaces will be completed by 2021.

“As the economy recovers in 2021, the demand for industrial space could increase. This is however tempered by new completions, which will contribute to an increase in supply barring any further deterioration of the COVID-19 situation,” JTC stated in their report.

CBRE head of research Desmond Sim said that whilst the increase in upcoming industrial supply may place some pressure on overall occupancy, factory rents could be supported by increased demand from the electronics and biomedical sectors, with Singapore’s 5G plan and vaccine rollouts in place.

“The overall warehouse pipeline remains subdued. This, coupled with continued demand from third-party logistics, food logistics and e-commerce players, could contribute to stable warehouse rental growth,” Sim added.

Meanwhile, Knight Frank head of research Leonard Tay noted that multiple-user factory prices and rents are likely to face downward pressure of 5% in 2021, taking into consideration the phased withdrawal of fiscal support by the government, as these properties tend to be occupied by smaller enterprises.

He also said single-user factories that are typically developed by manufacturers for their own use could fare slightly better.

“With the distribution of COVID-19 vaccines, the city-state’s strategic location and developed IT infrastructure would position Singapore as a key warehousing and storage hub, and logistics properties are expected to benefit with price and rent increases ranging from 1% to 3% in 2021,” Tay added.