Industrial rents grew 1.5% q-o-q in 2Q2022, up from the 1% q-o-q growth recorded the previous quarter (Picture: Samuel Isaac Chua/The Edge Singapore)
SINGAPORE (EDGEPROP) - Industrial rents grew 1.5% q-o-q in 2Q2022, up from the 1% q-o-q growth recorded the previous quarter, according to data released by JTC on July 28. This marks the seventh consecutive quarter of growth and the fastest quarterly growth since 3Q2013. On a y-o-y basis, rents grew 3.4% during the second quarter.
Industrial prices also rose, growing 1.5% q-o-q in 2Q2022 but easing from the 3.1% q-o-q surge recorded the previous quarter. Meanwhile, industrial occupancy rates inched up from 89.8% in 1Q2022 to 90% in 2Q2022.
The growth in industrial price and rental indices was supported by manufacturing output expansions in electronics and precision engineering, in addition to resilient demand for semiconductors, notes Leonard Tay, head of research at Knight Frank Singapore.
He adds that rising concerns relating to food security and access to raw materials and necessities prompted substantial stockpiling activity, which contributed to stronger demand for warehouses. “The strengthening Singapore dollar provided support to stockpiling, mitigating escalation in costs as inflation becomes increasingly significant,” he remarks.
Source: JTC
Warehouses charted the strongest performance among all the industrial sub-segments, registering a rental increase of 2.1% q-o-q and 5.7% y-o-y respectively in 2Q2022. During the quarter, warehouse occupancies increased to 90.9%, up from 90.3% in 1Q2022.
For factories, multiple-user factories saw the highest quarterly and annual growth in 2Q2022 at 2.1% and 3.7% respectively. “This could be attributed to the growing demand for high-specification multi-user factories, as occupiers look for office grade industrial spaces near the city fringe,” notes Catherine He, head of research, Singapore at Colliers.
Looking ahead, Tricia Song, CBRE head of research, Singapore and Southeast Asia, notes that industrial pipeline remains “extremely thin”, with multi-factory pipeline expected to taper down from 2023 while the majority of warehouse supply up until 2023 is already fully pre-committed.
To that end, the industrial real estate market is expected to benefit from the tight supply. “Barring any sharp slowdown in the global economy, demand for industrial space in 2022 is expected to be robust and occupancy should be relatively stable,” Song adds.
Colliers’ He, on the other hand, highlights that new supply will come onstream at an average total of about 1.2 million sqm annually from now until 2025, including 1.6 million sqm to be completed this year. This outpaces the 0.7 million sqm annual average over the past three years, meaning that supply is likely to catch up to demand and temper the pace of rental and price growth, she opines.
Source: JTC
Nonetheless, He notes that long-term demand for industrial space will still be driven by tailwinds such as Singapore’s increasing focus on high-value manufacturing and biomedical sectors. Colliers is projecting industrial rents to grow between 2% to 4% this year, while industrial prices are expected to grow between 5% to 7%.