POSITIVE MOMENTUM FOR PRIME INDUSTRIAL SPACE LED TO UPWARD REVISION OF YEAR-ON-YEAR PROJECTION TO 10-12%
16 August 2022 – Savills Research reports a 28% increase in strata industrial sales activity to a total of 512 transactions in Q2, the highest Quarter-On-Quarter (QoQ) increase since Q3 in 2014. Notably, sales of multiple-user factory sales rose significantly by 25.3% QoQ to 475 deals, which was mainly led by resale transactions of West Connect Building and Mega@Woodlands.
Transactions in this sector are likely backed by local SMEs that acquired ramp-up facilities with modern specifications and reasonable remaining tenure for their own business operations.Domestic pump priming is likely to be activated if the external economy slows, in efforts to create further demand for prime multiple-industrial spaces and allow for greater capacity to accommodate new work orders.
Savills’ prime business park monthly rents continued to trend upwards in Q2, rising 0.7% QoQ to S$5.93 per sq ft. This is due to the scarcity and steady demand of business parks located at Mapletree Business City, and those in the One-North and Labrador prime regions.
Despite strengthening economic headwinds and geopolitical uncertainties, the industrial and logistics market remains as one of the most resilient sub-asset classes across the spectrum of the real estate market. Positive momentum for modern industrial facilities is expected to continue. In Q2, the average monthly rent for Savills’ high-specs industrial basket increased by 1.1% QoQ to S$3.61 per sq ft.
Given that prime multiple-user factory space had already risen 9.0% Year-to-Date, Savills Research is revising our Year-on-Year (YoY) projection of increase in multiple-user factory rents from 0% to 2% to 10% to 12%.
Alan Cheong, Executive Head of Research Singapore adds, “Although this sub-asset class was expected to perform well as tenants sought to buffer up in an environment fraught with uncertainties, the strong uptick in demand for industrial space was rather unexpected. Many anticipated that a slowdown in the economy in the second half of the year may cause industrial rents to follow suit. However, the need of SMEs to stock up had motivated them to take on more space instead.”
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Read the full Q2 2022 Industrial Briefing here.