Savills’ monthly prime industrial rents maintained positive trend in Q3
Savills Research reported leasing sentiment and momentum in the industrial market had softened, with leasing volume falling 2.2% year-on-year (YoY).
Amidst a slowdown in the leasing momentum of the industrial market in the region and Europe, tenants’ expansion plans had weakened, 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.
The warehouse vacancy rate fell 0.3 of a percentage point (ppt) quarter-on-quarter (QoQ) to 8.7% in Q3 on the back of tight supply. For single- and multiple-user factory segments, despite positive net demand, 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 tacked by JTC extend gains in Q3, rising for 12 consecutive quarters to 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.
Islandwide vacancy level for business parks remained high at 19.5% in Q3, an inch up from the 19.4% in Q2.
Despite the improvement in vacancy rates in Mapletree Business City, Science Park and CleanTech Park, the islandwide vacancy level was affected by the poor take-up rate in the East Planning Region where the vacancy level went up to 27.0% (+0.7 of a ppt QoQ), the highest since 2009. It was mainly attributed to ESR Bizpark @ Chai Chee where vacancy level rose by 1.2 ppt QoQ to 24.8%. Furthermore, the vacancy level in Changi Business Park also increased by 0.5 of a ppt QoQ to record high at 27.4% in Q3.
As a result of steady demand in the better-maintained prime business parks, Savills’ prime business park monthly rents held firm in Q3, edging up 0.1% QoQ to S$5.89 per sq ft. On the other hand, landlords of the standard business park properties might rather lower their rental expectations than to have vacant premises. This resulted in a 0.2% QoQ decline in the monthly rents of Savills’ standard business park properties to S$4.10 per sq ft.
Underpinned by the growth of the high-value manufacturing industries, the demand for high spec buildings remained strong. Newly revamped developments such as 7002 Ang Mo Kio Avenue 5 have been drawing interest before completion, securing about 50% occupancy nearing to completion. Nonetheless, rental growth has stalled as economic challenges have made occupiers cautious. According to Savills’ high-spec industrial basket, the average monthly rent remained flat at S$3.83 per sq ft in Q3.
As demand for multiple-user factory space is anticipated to be supported by high-value industries, rents are forecasted to see healthy growth of around 10% in 2023. Owing to tight supply for quality warehouse space, warehouse rents are projected to grow around 5% by end-2023.
Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore: “Most of the industrial sectors are facing tremendous external head winds, therefore rental growth in 2024 is likely confined to the logistics sector where fears of supply chain disruptions remain.”
Sally Tan, Managing Director, Commercial, Industrial Logistics, Savills Singapore: "Industries like E-commerce, retail, pharmaceuticals and manufacturing that rely heavily on a resilient supply chain are poised to benefit from growth in the logistics sector. With growing emphasis on adopting sustainable practices, companies in new areas like green transportation, alternative energy sources, sustainable packaging, and waste reduction, etc, will contribute to expansionary demand."