
Summary
Â
(1) Industrial property prices and rentals are still increasing, but the annual growth rates are slowing down.
Â
(2) Demand for industrial space outpaced supply in 2Q 2024, contributing to the rise in factory prices, rentals and occupancy rates.
Â
(3) In the next 18 months, there is a very large supply of industrial space coming online, which could be more than what the market could absorbed.
Â
(4) The current health of the business park market is far from rosy. The current vacancy rate at 21.7% is the highest among all the different types of business space, including offices and retail spaces.
Â
Â
Introduction
Â
At as the second quarter of 2024 (2Q 2024), the industrial property price and rental indices are still on the uptrends since 2020. The industrial real estate market appears to have left the adverse effects of the pandemic far behind.
Â
Industrial property price growth is decelerating
Â
The overall industrial property price index increased by 1.2% quarter-over-quarter (qoq), led by the price growth of multiple-user factories, whose capital values appreciated 1.7% qoq and 4.9% year-over-year (yoy) in 2Q 2024.
Â
However, the annual rate of industrial property price growth is slowing down. The year-over-year price growth peaked at 7.5% in 4Q 2022, riding on the positive effects of the re-opening of the Singapore economy and borders after the Covid lock-down.
Â
Since then, the annual growth rate of industrial real estate price index has decelerated gradually to the present 3.0% in 2Q 2024. This shows that the positive post-pandemic economic effects on the industrial market are waning.
Â
Industrial property rentals grew faster than prices
Â
Industrial property rentals increased 6.6% yoy in 2Q 2024, which is at a faster rate than the 3.0% yoy growth of capital values. This should bring some cheer to investors of industrial space.
Â
However, the annual growth rate of industrial property rental is also gradually decelerating after peaking at 9.4% in 2Q 2023. Within a 12-month period, the year-over-year growth rate of industrial rentals slipped to 6.6% in the second quarter of this year.

Source: Mogul.sg Research, JTC
Strong demand and falling vacancy rates drove up industrial property prices and rentals
Â
The growth in the capital and rental values of industrial space in 2Q 2024 is driven by the sharp rise in demand where 2.78 million sq ft of industrial real estate is taken up. Over the same period, only 1.7 million sq ft of manufacturing space were added to the existing stock.
Â
As the supply of industrial space tried to keep up with demand, vacancy rate fell from the 6-year peak of 11.3% in the first quarter of this year to 11.0% in 2Q 2024.
Â
Not out of the woods yet
Â
The industrial real estate market appears to be healthy, but it is not out of the woods yet.
Â
In the next 18 months, there is a large supply of industrial space coming online, which could be more than what the market could absorbed over the 18-month period. In the second half of this year, 8.5 million sq ft of newly completed space would become available for occupancy. This is about the same annual volume of space that would be completed in 2026 and 2027.
Â
Next year, a massive 18.22 million sq ft of industrial properties will become available. About 30% of the total supply, or 5.4 million sq ft are single-user factory space, where the vacancy rate at 12.0% in 2Q 2024, is the third highest among the four main types of industrial space.
Â
Millstone around the neck
Â
More worrisome is the large supply of business park space in the pipeline. About 2.49 million sq ft of business park buildings would become available next year. This is on top of the 1.25 million sq ft of business park properties that will be added to the existing stock in the second half of 2024.
Â
The current health of the business park market is far from rosy. The current vacancy rate at 21.7% is the highest among all the different types of business space, including offices and retail spaces. While the rentals of all the other types of industrial space increased in 2Q 2024, the rental index of business parks is the only one that contracted.
Â
Outlook: Potential glut of industrial real estate
Â
The manufacturing sector in Singapore is currently relatively weak. Non-oil domestic export has contracted in the first half of this year. The manufacturing output fell 7.5% qoq in the first quarter of 2024.

Source: Mogul.sg Research, JTC
The large supply of industrial space that will become available next year would take the property market at least two years to absorb when the economy is expanding on an even keel. Unless business activities the Singapore manufacturing sector were to pick up significantly in the next 18 months, the industrial property market would face a glut of new factory space that would put pressure on rentals and capital values.
コメント