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Ms. Tay Huey Ying, Head of Research and Consultancy, Singapore
郑惠匀, 研究与咨询部主管 (新加坡)
Industrial rent on track to post milder decline for full-year 2017 than 2016
JTC’s latest statistics showed that Singapore’s industrial property rent stayed soft and recorded its 10th straight quarter of decline in 3Q17. We are of the view that this is largely the result of supply rather than demand pressure.
It is heartening to note that new demand for industrial space for the first nine months of 2017 (830,000 sqm) had rebounded by 51.5% from the same period a year ago (548,000 sqm). The strong recovery in manufacturing and trade activities had likely supported demand and led to this improvement.
Even so, as new completions remained aggressive and continued to outpace demand, rent stayed under pressure.
Similar to 2Q17, the Business Park segment stood out as the star performer in 3Q17. JTC’s statistics showed that the rent for Business Park space bucked the declining trend by posting its second consecutive quarter of increase on the back of the fifth consecutive quarter rise in occupancy rate amid stable supply stemming from a lack of new completion.
JLL’s research showed that the average monthly gross rent of Business Park space firmed in 1Q17 by a marginal 0.3% q-o-q rise and held stable in the following two quarters at SGD 3.71 per sq ft per month.
Given that some 931,000 sqm gross floor area of industrial space could be completed in the final quarter of 2017, net new supply for full-year 2017 is likely to hit above 2 million sqm – a figure not seen since 1997 when stock increased by 2.1 million sqm.
Even with demand improving on the back of the steadier manufacturing and trade activities, the industrial property market will need time to absorb the excess supply that has been built up over the last few years. Thus, we are maintaining our view that industrial rent would remain under downward pressure for the rest of 2017, and probably into the first half of 2018.
Nonetheless, as rental decline for the first three quarters of 2017 stood at 2.7%, 2017 is on track to record a full-year rental decline that is much slower than the 6.8% contraction posted in 2016.
The business park segment is expected to outperform the general market given steady demand amid a dearth of new supply in 2017.
Ms Tay Huey Ying
+65 6494 3761 / +65 9029 3236