Singapore industrial rents rise 1.7% in Q1, prices dip for the first time in over three years

Price and rents expected to soften due to slow global growth and high supply.

Rents of all types of industrial properties in Singapore rose by 1.7% QoQ in the first quarter, posting its fourteenth consecutive quarter of growth, while prices slipped for the first time in over three years, according to the latest JTC data.

Last quarter’s uptick, which matched the rental growth seen in the fourth quarter, was mainly driven by the 2.1% QoQ rise in rents in business parks and single-user factories, followed by the 2% increase in warehouse rents. 

The sector continued to book rental growth despite seeing vacancy rate climbing to 11.3% in the first quarter, the highest level in nearly six years. 

This was mainly caused by the spike in net industrial space in the city-state, which nearly doubled to 127,000 sqm last quarter from just 65,000 sqm by the end of 2023, according to Tan Boon Leong, JLL’s executive director for logistics and industrial in Singapore.

“1Q24’s rent growth is thus likely driven by the higher rents sought by landlords for better-performing quality premises. JLL Research’s showed that landlords persistently pushed for higher rents amidst a supply crunch in the logistics/warehouse segment during the quarter,” Tan said.

While the leasing market remains on an uptrend, the same data from JTC showed the all-industrial property price index fell by 0.2% last quarter, ending thirteen quarters of continuous growth.

A 1% price dip in single-user factories caused the slump, aggravated by the slowing price growth of multi-user factories. 

Lee Sze Teck, senior director for data analytics at Huttons Asia, said the sluggish outlook on the manufacturing sector and the broader economy are pushing more manufacturers to rent instead of buying their own factories, causing rents to rise and prices to fall.

“This pushed up rents of industrial space,” he said. “Weakness in the manufacturing sector and high interest rates are resulting in cautious sentiments among buyers thus limiting price increase.”

Industrial rents and prices are projected to soften for the rest of the year due to the rising supply of new space in the country and a broader slowdown of the global economy, said Catherine He, research head at Colliers.

He estimated that 1.1 million sqm of industrial space will come onstream each year from 2024 to 2026, higher than the average annual supply of 1 million sqm and the actual take-up of 0.6 million sqm in the past three years.

“Rental growth is expected to moderate in light of the higher cost of capital, tenant resistance to higher rents, and the higher upcoming supply. There has also been more renewals and consolidations than relocations or expansions, highlighting the financial constraints occupiers are facing,” she added.