SINGAPORE (EDGEPROP) - The JTC all industrial rental index grew for the third consecutive quarter by 0.6% q-o-q in 2Q2021. Rental growth was observed across all JTC factory and warehouse submarkets: single-user factory (+0.1% q-o-q), multiple-user factory (+1% q-o-q), and warehouse (+0.2% q-o-q). The pace of increase was faster for high-specs factory and prime logistics projects amid tighter occupancy, says ricia Song, CBRE head of research for Southeast Asia. (See also: Industrial properties back in play)

“The sustained uptrend in rents was underpinned by healthy demand on the back of strong manufacturing output growth,” says Tay Huey Ying, JLL head of research & consultancy, Singapore.

In fact, islandwide net absorption amounted to 366,000 sqm (3.94 million sq ft) in 2Q2021 – the highest quarterly level in more than three years, notes Tay. This pushed islandwide vacancy rate to below the 10%-mark for the first time in more than five years, she adds. It’s back to 9.9% -- the vacancy level in 1Q2016.

Overall industrial occupancy was up 0.1% q-o-q to 90.1% in 2Q2021. “The growth was attributed to the multiple-user factory submarket, which saw a 0.7 percentage point increase to 89.7% amidst rising demand,” says CBRE’s Song. Meanwhile, occupancy for warehouse fell slightly, by 0.1 percentage points due to project completions which came on stream this quarter – partial completion of JTC Logistics Hub @ Gul, AEI of Logos Tuas Logistics Hub and remaining completion of Cogent Jurong Island Logistics Hub, notes CBRE.

JTC’s islandwide industrial property price index rose 1.8% q-o-q in 2Q2021, the highest pace of increase since 1Q2014, when a 3.8% rise was recorded. “The weight of capital chasing industrial assets in light of their resilient performance during the pandemic has led to 2Q2021 Singapore industrial property prices posting their strongest q-o-q growth in seven years,” says JLL’s Tay.

Some $2.3 billion worth of industrial assets changed hands in 1H2021 on the back of strong acquisition demand; and surpassing the $1.9 billion recorded in 2020, according to JLL’s research.

In 2H2021, some 18.8 million sf of industrial space is expected to be completed, with single-user factory space making up 46% and multiple-user factory space comprising 31%. “While the impending supply will keep factory price and rental growth in check for the rest of 2021, there are reasons for optimism,” says Leonard Tay, head of research for Knight Frank Singapore.

“Singapore continues to draw manufacturing investment, including international biotechnology firms,” according to Knight Frank’s Tay. He points to BioNTech, the German biotechnology company responsible for the Pfizer vaccine. BioNTech intends to open its Southeast Asian headquarters in Singapore this year, with further plans for the development of a mRNA-based vaccine production facility set to be operational from 2023. Meanwhile, Sanofi Pasteur plans to expand its footprint in Singapore with the development of a $638 million vaccine production centre with full operations beginning in 2026, Tay adds.

“Even though the resurgence in COVID-19 cases at home and abroad has put a dampener on the recovery in the transport engineering cluster, recent business sentiments in the manufacturing sector were positive according to the Economic Development Board (EDB),” Tay notes.

Knight Frank is projecting overall factory rents and prices to increase moderately between 1% and 3% for the whole of 2021.