Warehouse segment drags Singapore’s Q3 industrial leasing demand

The leasing volume declined by 2.2% to 3,138 tenancies during the quarter.

Despite some signs of stabilisation, leasing momentum in the industrial market softened amid a slowdown in the region and Europe. According to a report by Savills, these economic headwinds have weakened tenants’ expansion plans, resulting in a decrease in new tenancies signed. 

The leasing volume ended a two-quarter increase with a 2.2% YoY decline to 3,138 tenancies in Q3/2023, with most being tenancy renewals. 

Here’s more from Savills:

While leasing activities for multiple-user factory spaces remained relatively stable (+0.4% YoY) in Q3, that for single-user factory spaces slipped by 5.6% YoY. The overall leasing demand was largely dragged down by the warehouse segment which continued to see a decline in tenancies signed (-13.0% YoY) in Q3. 

Nonetheless, the warehouse vacancy rate fell on the back of tight supply, down 0.3 of a percentage point (ppt) QoQ to 8.7% in Q3. Although there was positive net demand for single- and multiple-user factory segments, their vacancy rates rose marginally to 11.8% (+0.4 of a ppt QoQ) and 10.3% (+0.2 of a ppt QoQ) respectively in Q3 as new factory supply came online. 

Notwithstanding weak external demand, rents continued to pick up in Q3. The index of general industrial rents tracked by JTC extended gains in Q3, rising for 12 consecutive quarters to a new record high. Rents rose across all segments in Q3, with single-user factory and warehouse segments registering a faster pace of rental growth. Savills’ monthly prime industrial rents remained on an upward trend in Q3, with multiple-user factories and warehouse and logistics properties rising by 4.3% QoQ to S$2.22 per sq ft and 0.6% QoQ to S$1.62 per sq ft respectively. The JTC’s rental index for All Industrial Property had risen 7.1% YTD with those of multiple-user factories and warehouses going up by 8.2% and 6.8% respectively.