Industrial rents and prices post 12th consecutive quarter of growth in 3Q2023

Industrial rents and prices in Singapore continued to rise in 3Q2023, despite a grim outlook for the manufacturing sector. Statistics released by JTC show that the all-industrial rental and price indices increased 2% and 1.4% q-o-q respectively, marking the 12th consecutive quarter of growth since 4Q2020. On a y-o-y basis, industrial rents and prices rose by 9.3% and 6.2% respectively.

Despite a weak manufacturing sector, industrial real estate indicators of occupancy levels, prices and rents have remained resilient for most industrial property types. JTC’s data showed that the growth in 3Q2023 was driven by the logistics and warehouse segment, which recorded a rental increase of 2.4% q-o-q. Meanwhile, rents for the multiple-user factory, single-user factory and business park segments rose 2%, 1.9% and 1.2% q-o-q respectively.

Industrial occupancy rates registered a slight fall of 0.2 percentage points to 88.9%, as new supply outpaced demand. Prices of multiple-user factories rose 1.1% q-o-q – its slowest quarterly growth in eight quarters, while prices of single-user factories rose 1.7% q-o-q.

Head of Research for Singapore and Southeast Asia at CBRE, Tricia Song, points out that despite relatively attractive yields for leasehold industrial assets, investors may be more mindful of the high cost of financing.

Moreover, with an uncertain economic backdrop and increased supply expected in 2024, as well as higher rent base, Song believes future rental growth is likely to slow.

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Nevertheless, Knight Frank Singapore’s Head of Research, Leonard Tay, says that there are some early signs that the outlook for manufacturing may be more hopeful by the end of 2023. This is supported by positive business sentiment for the manufacturing sector, along with the Singapore Purchasing Manager’s Index registering an expansion in September.

JLL’s Executive Director, Logistics and Industrial, Singapore, Tan Boon Leong, anticipates industrial rents may post full-year gains of around 8% to 9%, and for industrial price growth to moderate from 7.5% in 2022 to around 5% to 6% in 2023. He also believes that growth will likely extend into 2024 for both rents and prices.