Chong Xin Wei
In 2025, the statutory board expects 1.2 million sq m of industrial space to be completed
RENTAL rates for industrial properties in Singapore inched up 0.5 per cent in the fourth quarter of 2024 as compared with the quarter before, JTC’s latest data released on Thursday (Jan 23) indicated.
This brings the full-year rental index growth to 3.5 per cent, which represents a “sharp decline” from the previous annual increase of 8.9 per cent in 2023, said JTC.
Dr Chua Yang Liang, JLL Singapore’s head of research and consultancy for South-east Asia, said the slowdown in rental index growth for all industrial properties suggests that the “deceleration is no longer transitionary but structurally embodied in the market”.
Warehouse rentals had the highest quarter-on-quarter (qoq) growth at 0.9 per cent, and stood at 3.5 per cent compared with Q4 in the previous year.
Catherine He, head of research at Colliers, noted that the demand for warehouses has been supported by third-party logistics providers and consumer goods.
“Logistics firms may also be setting up here or ramping up operations, in anticipation of the... expansion of more manufacturing companies in this region,” she added.
On a qoq comparison, multiple-user factory space rentals were up 0.4 per cent, business park rentals rose 0.2 per cent, and those of single-user factory spaces inched up 0.1 per cent.
On the year, rentals of multiple-user factory spaces grew 3.8 per cent. Single-user factory and business park rentals increased by 3.2 per cent and 1.9 per cent, respectively.
Dr Chua pointed out that the weakest sub-market was the business park segment. Although it recorded 0.2 per cent quarterly growth, geo-economic uncertainty and the need for cost containment have dampened business confidence in this segment, he said.
The price index of all industrial spaces increased 2 per cent compared with Q3, and 3.5 per cent from the previous year.
Multiple-user and single-user factory prices climbed on a yearly basis, with multiple-user factory prices gaining 4.9 per cent and single-user factory prices increasing 1.9 per cent in 2024.
As at Q4, total industrial stock amounted to 53.3 million square metres (sq m), up from 52 million sq m in the previous quarter.
The overall occupancy rate remained unchanged at 89 per cent. This comes as new demand for industrial space was balanced by the completion of ongoing projects, said JTC.
The occupancy rate for business parks fell 0.9 per cent in Q4 to 77.9 per cent, mainly due to outlying and older business parks, where “vacancy remains elevated”, said Colliers’ He.
Rents in prime business parks have remained flat due to a lack of activity and limited availability, she added.
As at Q4, there were about 734 units in uncompleted strata-titled developments which remained available for sale. These units totalled 129,071 sq m of space, and about 90 per cent of them were smaller than 200 sq m in size.
Ramping up supply
Supply of industrial space is expected to rise significantly in 2025, with JTC projecting 1.2 million sq m of it to be completed this year.
“This surge in supply has led to the present supply-demand imbalance, with segments of the market now seeing upcoming supply with slower pre-commitments or completed projects with lower occupancy,” said He.
Some 38 per cent of new supply will be from warehouse spaces. As He expects warehouse supply to peak in 2025 along with “more pockets of spaces coming into the market”, she believes warehouse occupancy rates and rents will ease further due to the availability of more options.
Single-user factories will account for 25 per cent, while multiple-user factories will make up 17 per cent.
The remaining 19 per cent will come from business park spaces. This surge in supply, along with declining demand, may continue to weigh on the sector, she added.
In 2026 and 2027, an additional 2.1 million sq m of industrial space is expected to be completed. This translates to an average annual supply of about 1.1 million sq m from now until end-2027.
In comparison, the average annual supply and demand for industrial space were about 900,000 sq m and 600,000 sq m, respectively, over the past three years.
Outlook
Amid weaker demand and higher supply, He expects annual industrial rental and price growth for 2025 to moderate to between zero and 2 per cent.
“The risk of higher vacancy rates, particularly in the business park sector, is likely to sustain downward pressure on rents, which have increased by 23 per cent since their last trough... in Q3 2020,” she noted.
Meanwhile, JLL’s Dr Chua expects “some support for industrial rents” in 2025, driven by semiconductors and general manufacturing businesses, such as those in the food and beverage segment.
Lee Sze Teck, Huttons Asia’s senior director of data analytics, also said higher tariffs on exports to the US and the US-China trade war could spur some manufacturers to set up shop in Singapore.
“Prices and rents of industrial spaces should be stable and may see a growth of 1 to 3 per cent in 2025,” he said.