There were 3,304 industrial leasing transactions in 3Q2024 (Picture: Samuel Isaac Chua/The Edge Singapore)
Industrial leasing activity grew in 3Q2024, coming off the back of a manufacturing sector rebound. Data compiled in Knight Frank Singapore’s latest quarterly industrial and logistics report show that industrial property leasing transactions climbed 5.8% q-o-q to 3,304 leases.
This supported a 1.6% q-o-q rise in the total value of rental transactions to $29.1 million last quarter. On a y-o-y basis, leasing transactions grew 2.3% compared to 3Q2023.
The pick-up in leasing activity follows a 9.9% q-o-q expansion in Singapore’s manufacturing sector in 3Q2024, based on advance estimates by the Ministry of Trade and Industry. Output increased across all manufacturing clusters, except for biomedical manufacturing.
Data by the Economic Development Board showed that Singapore’s total manufacturing output excluding biomedical manufacturing surged 21% y-o-y in August. The growth was underpinned by output from the electronics cluster, which spiked 49.1% y-o-y, coming off of a low semiconductor production base last year as well as higher demand for electronics.
Rents of industrial properties island-wide saw quarterly growth of 0.8% and 0.9% in the 25th percentile and median categories respectively in 3Q2024, though rent in the 75th percentile fell 3.6% q-o-q.
Nonetheless, island-wide rents for single-use factory spaces grew across all percentiles. Rents in the 75th percentile climbed 11% q-o-q to $2.47 psf per month (psf pm), followed by rent in the 25th percentile (up 2% q-o-q to $1.55 psf pm) and the median category (up 0.6% to $1.80 psf pm).
Apart from the manufacturing rebound, expectations of a long-awaited interest cate by the US Federal Reserve also contributed to an optimistic outlook that boosted industrial sales activity, Knight Frank’s report highlights. Industrial property sales jumped 199.6% q-o-q to reach $3.1 billion across 456 deals in 3Q2024. On a y-o-y basis, the sales value surged 206%.
The sales volume was bolstered by several major deals in August, which the report attributes to investors pulling the trigger on deals in anticipation of interest rate cuts and a return of positive carry. The biggest deal was the $1.6 billion sale of a portfolio comprising seven industrial properties owned by Blackstone and Soilbuild Group to a joint venture between Lendlease and private equity group Warburg Pincus.
Other notable transactions in August include the purchase of a 51% stake in an industrial building at 20 Tuas South Avenue 14 by ESR LOGOS REIT for $444.6 million. There was also the sale of a 49% stake in Elementum, a biomedical sciences development in Buona Vista, by Ho Bee Land to a Brunei sovereign wealth fund. The deal valued the stake at $272 million.
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Looking ahead, Calvin Yeo, head of occupier strategy and solutions at Knight Frank Singapore, expects the industrial real estate market to continue picking up steam. “With the electronics sector leading manufacturing growth, market activity in the industrial sector is expected to increase alongside interest rate cuts,” he predicts.
He anticipates industrial transaction volume to gain momentum, driven by sales of multiple-user factory spaces and warehouses. “With the borrowing environment expected to become more benign, individual buyers purchasing for business use and private equity funds acquiring assets for investment will increasingly start to make their move,” he adds.
Meanwhile, Yeo believes industrial property rents and prices will remain stable for the rest of the year, with the market primed for more growth in 2025.
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