A map showcasing SN Real Estate's exclusive marketing projects, with a total gross development value of more than $1 billion. (Map: SN Real Estate)
Over the first three quarters of this year, Singapore’s industrial property market has seen strong to moderate performance across various business and manufacturing segments, says Sarah Ng, key executive officer of SN Real Estate. The privately owned real estate agency is recognised for its focus on industrial and commercial properties, managing one of the most extensive portfolios of direct developer sales in Singapore.
Ng notes that while businesses are cautious about operating and financing costs, many actively explore real estate opportunities, making strategic decisions that prioritise flexibility and long-term value. The prevailing market conditions have encouraged companies to make strategic, well-considered decisions, focusing on flexibility and long-term value as they navigate a dynamic landscape.
According to the latest industrial data published by JTC, overall industrial rents recorded quarterly growth of 1% in 2Q2024, slowing from the 1.7% q-o-q growth in 1Q2024. On a yearly basis, rents across the entire industrial real estate market climbed by 6.6% in 2Q2024, compared to the 7.8% growth recorded during the same period last year.
Certain industrial asset classes, such as high-quality warehouse assets and multi-user factories, have performed well so far this year, as demand for such spaces has been supported by robust business activity in the logistics and cold storage industries, says Ng, adding that this has helped to push up rental rates for this segment. Warehouse occupancy rates stood at 91.3% in 2Q2024, and rents rose 0.5% q-o-q.
On the other hand, business parks continued to struggle as the segment faced relatively low occupancy rates and moderate rental growth. However, Ng points out that there is uneven performance across various business park locales. For example, the average vacancy rate at one-north was 9% in 2Q2024, while the average vacancy rate at Changi Business Park was about 30%, and 40% at International Business Park in Jurong.
“Median rents for multiple-user factories increased, while leasing activity remained relatively stable with only a minimal decline in transactions,” says Ng. “Overall, we can conclude that Singapore’s industrial property market has exhibited varying levels of success across these segments.”
Last month, the US Federal Reserve lowered its federal funds rate by 50 basis points, easing its monetary policy for the first time in four years. According to Ng, this move brought a sense of renewed optimism to many local business owners and industrialists.
“Many business owners and investors are currently holding onto cash, waiting for favourable opportunities. Demand for logistics and high-spec spaces remains strong, prompting businesses to increasingly prioritise flexibility to adapt to the changing market landscape,” she says.
JTC forecasts that from 2024 to 2026, an average annual supply of 11.8 million sq ft of new industrial space is expected to come onstream. This year, new completions will inject an estimated 8.5 million sq ft of new industrial space, but a bumper crop of new project completions next year will see approximately 18 million sq ft enter the market.
Ng believes the market will gradually absorb this new supply of industrial space. Based on statistics published by JTC, about 46% of the factories are single-user and primarily developed for businesses’ own use. “Consequently, the remaining gross floor area will be absorbed over the next few years,” she says.
The influx of new industrial developments, armed with more modern specifications, is also encouraging more businesses to relocate from older, ageing manufacturing spaces to newer projects, she says.
She adds that trends in industries such as F&B, e-commerce, logistics, advanced manufacturing, and data centres are also shaping their future real estate considerations. “For example, restaurants are transitioning to central kitchens, and retail shops are centralising their warehouses for optimised operations. As new industrial spaces are launched and completed, the take-up rates will reflect how businesses adapt to these changing market dynamics.”
In the short term, rental prices are expected to remain stable but Ng anticipates some growth in rents for multiple-user factories this year due to the current low supply pipeline. Although the influx of new industrial space over the next two to three years may initially moderate take-up rates at new projects, Ng believes the supply will be absorbed over time, resulting in increased leasing options and a more dynamic leasing market.
The second half of the year is expected to see sustained interest in strata industrial units, contributing to a steady volume of strata sales transactions in 2024, says Ng. She adds that this sales momentum, coupled with upcoming new launches, positions the market for growth in the coming year.
“With several new developments set to be launched in late 2024 and early 2025 — including LHN Food Chain, Tampines Connection, Stellar @ Tampines, Foodpoint @ Taiseng, Space18 and Harrison Food Building — it is likely that sales activity for strata industrial units will remain strong through the latter half of 2024 and into the first half of 2025,” she notes.
Looking ahead, industrial investors will prioritise logistics, food tech, high-tech manufacturing, renewable energy, and data centres as they capitalise on the growth in e-commerce and digital transformation that has heightened the need for efficient warehousing and distribution facilities, says Ng.
“Additionally, industries such as food production are likely to drive demand for specialised industrial spaces as companies adapt to new market trends,” she says. “The trend towards higher-quality, high-specification facilities are becoming more pronounced as businesses prioritise quality over quantity. This is a great time for investors who are ready to upgrade their properties to meet the changing demands of tenants.”
Overall, Singapore’s industrial property market has demonstrated its resilience amid macroeconomic headwinds this year, and demand has been especially robust in the logistics and warehousing sectors, says Ng. The future also looks bright for high-tech manufacturing and data centres, which have produced stable rental growth over the past few years.
“So far this year, rental prices have held steady, with high-specification spaces seeing more demand, while multi-user factories have experienced stabilisation, following previous years of rising rents,” she says, although she cautions that the year to come will still be characterised by economic uncertainties such as inflation, which may impact business spending and investment.