Singapore industrial price and rental indices rise for twelfth consecutive quarter

The rental index grew by 2.0%, whilst the price index rose by 1.4% in Q3.

According to Colliers, despite tepid industrial indicators, the JTC All Industrial rental index continued its twelfth consecutive quarter of growth in Q3 2023, rising by 2.0%, slowing down slightly from the 2.1% q-o-q growth in the previous quarter. Rental growth was positive across all segments, despite declining occupancy across the board, apart from warehouses.

“The price index rose by 1.4% q-o-q, also a slight slowdown from the 1.5% q-o-q growth in Q2 2023. Rental and price growth are expected to continue to moderate in light of slowing global growth and weakness in the manufacturing sector,” the report said.

Here’s more from Colliers:

The JTC All Industrial price and rental indices continued their twelfth consecutive quarter of growth during Q3 2023, reaching their highest levels since Q1 2016 and Q2 2014 respectively. This was despite the fact that industrial indicators remained weak, though NODX and manufacturing contracted at slower rates, with the PMI moving out of contractionary territory.

New completions and robust supply pipeline may put more pressure on rents and occupancy

Overall occupancy declined by 0.2% q-o-q, (vs an increase of 0.3% q-o-q in 2Q 2023), as new completions came onto the market. There will continue to be a ramp-up of supply in the next few years; between 2024 to 2026, there is an average annual supply of 1.0 mil sqm coming onstream, exceeding the average annual demand of 0.7 mil sqm per year over the past three years. As such, supply is expected to stay ahead of demand, which could put more pressure on rents and occupancy.

Mr Lynus Pook, Head of Industrial Services, Singapore, commented: "With weaker demand relative to new supply, there is likely to be lower leasing interest and activity. As such, landlords may have to give in to lower rents or offer incentives to retain or attract new tenants, especially for the older projects.”

Warehouse and modern facilities to support the overall industrial sector

The warehouse segment is expected to continue being the bright spot of the sector, with strong demand from last-mile logistics and cold storage. In addition, there continues to be investments into new facilities in Singapore, which will help support the overall industrial sector. New builds are expected to lead rental growth as they are more likely to be able to meet the business requirements of high-tech industries such as biomedical and advanced manufacturing.

Ms Catherine He, Head of Research, Singapore added: “Relevant industrial indicators such as NODX, PMI and manufacturing output have shown improvements with business expectations remaining positive for the remainder of 2023. Against this backdrop, industrial demand could turn a corner early next year.”