Some business parks saw more sluggish take-up, especially since the completion of the first phase of Punggol Digital District in 2H2024 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Overall market sentiment in the business park segment remained lukewarm, says Savills Research in a report on Feb 14. Some areas saw strong take-up, such as in the one-north cluster. Others saw more sluggish take-up, especially for those in the east region, since the completion of the first phase of Punggol Digital District in 2H2024. Therefore, the islandwide vacancy rate for business parks rose to 22.1% in 4Q2024, up from 21.6% y-o-y, leading to the highest level since 2010, according to the report.
Notably, the vacancy rate around ESR Bizpark @ Chai Chee in the East region hit a record high at 31.8% in 4Q2024. Meanwhile, the cluster in the West region, including Mapletree Business City and Science Park, recorded an increase in vacancy rate from 13.7% in 4Q2023 to 15.4% in 4Q2024.
The vacancy rate around ESR Bizpark @ Chai Chee in the East region hit a record high at 31.8% in 4Q2024 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
While some landlords have become more generous with incentives to retain and attract tenants, others still have certain rental expectations for prime spaces, says Savills. Rents continued to climb despite mixed market sentiment, with the JTC rental index for business parks rising at a slower pace of 1.9% y-o-y in 4Q2024, compared with 3.4% y-o-y growth in 4Q2023.
According to Savills, monthly rents in prime business parks increased by 6.4% y-o-y in 2024 to $6.27 psf—the highest increase since the data was compiled in 2013.
Meanwhile, monthly rents of standard business parks remained relatively flat compared to the past four years, growing at a subdued 0.2% y-o-y to $4.04 psf in 4Q2024. Similarly, rents for high-spec industrial spaces rose at a muted pace of 0.5% y-o-y to $3.92 psf.
“While the full-year economic growth for 2024 outperformed expectations, the outlook for 2025 is again expected to be buffeted by headwinds,” says Alan Cheong, Savills Singapore executive director of research & consultancy.
“Coupled with further escalations in geopolitical conflicts, trade tensions among major economies such as Trump 2.0 tariffs, and a possible reignition of inflation, economic growth is expected to soften,” continues Cheong. “As geopolitical and trade tensions intensify, highly trade-dependent economies such as Singapore are expected to face some downside risks to economic growth over the medium term.”
The pipeline supply for factory space is expected to surge from 2026, with a slew of new completions of warehouses and business parks this year, says Savills.
However, multiple-user factory rents are forecast to continue rising at the same pace of up to 3% this year in the face of limited supply. As the bulk of the new prime logistics space has been pre-committed, Savills expects occupancy rates and rents to remain stable.
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On the other hand, Savills cautions that the supply boom from the upcoming completion of Punggol Digital District and the redevelopment of 1, 7 Science Park Drive could put further pressure on rents and occupancy, particularly in older developments.
“For business parks, we believe that centrally located facilities may still be able to maintain rents in 2025 whilst older parks may continue to experience elevated vacancy levels and weaker rents,” says Cheong.