Industrial Market Loses Some Momentum 2Q2024 Savills
According to research compiled by Savills Singapore in an August report, the industrial market showed mixed performance in the second quarter of 2024. Industrial leasing volume slowed down as demand softened in most segments. Last quarter, a total of 3,123 industrial tenancies were recorded, which is a 5.3% decline compared to the previous year.
The hardest hit segment was single-use factory spaces, with a 27.3% drop in leasing volume to 144 tenancies – the lowest since 2020. On the other hand, leasing volume for multiple-user factory spaces remained stable, while warehouses saw a slight increase.
However, all industrial segments experienced a decline in vacancy rates in 2Q2024, reversing the trend of previous quarters. The vacancy rate for warehouses decreased by 0.2 percentage points (ppt) quarter-on-quarter to 8.7%, while the vacancy rate for multiple-use factories eased 0.8 ppt quarter-on-quarter to 8.7%. Single-use factories recorded a 0.2 ppt decline in vacancy to 12%.
The vacancy level for business parks also showed improvement, dropping by 0.3 ppt quarter-on-quarter to 21.7% in 2Q2024. This is the first decline after six consecutive quarters of increase. According to Savills, the improved vacancy rate was driven by better occupancy in the one-north area, although older developments in the outskirts continue to face pressure.
In terms of rents, there was a slower rate of increase in some segments. In 2Q2024, a basket of industrial properties tracked by Savills recorded a 1.1% increase in multiple-user factory rents to $2.26 psf per month (pm). Warehouse and logistic properties saw an average rental growth of 0.6% quarter-on-quarter to $1.68 psf pm, while average business park rents slightly increased by 0.1% to $4.07 psf pm, supported by strong performance in newer clusters.
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Savills also notes that high-spec industrial spaces remain attractive. The firm’s high-spec industrial basket saw an average rental increase of 0.6% quarter-on-quarter to $3.96 psf pm in 2Q2024.
In the sales market, strata industrial sales activity rebounded in 2Q2024, with transactions increasing by 42.9% quarter-on-quarter to 513 deals – the highest level in almost two years. According to Savills, this was mainly due to the bulk sale of 44 units at Cititech Industrial Building on Aljunied Road by City Developments. Sales at Food Ascent, a food factory at Aljunied Road, also contributed to the volume.
In terms of prices, industrial properties tracked by Savills saw slower price appreciation across all tenure types in 2Q2024. Prices for freehold properties increased by 0.5% quarter-on-quarter to $830 psf, while prices for 60-year leasehold properties rose by 0.7% to $516 psf. Properties with a 30-year leasehold tenure saw the smallest price growth of 0.1% quarter-on-quarter to $325 psf.
Looking ahead, Alan Cheong, executive director of research and consultancy at Savills Singapore, believes that multiple-user factory rents may see some growth during the rest of the year, supported by a low supply pipeline. He has revised his rental growth forecast for multiple-user factories for the whole year from 0% to between 0% and 2.2%. For warehouse and logistics space, he maintains his full-year rental growth forecast of 0% to 3%.
