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News Release

Singapore

JLL News Flash | A bottom is in sight for industrial property market


A bottom is in sight for industrial property market

Tay Huey Ying, Head of Research and Consultancy, Singapore

郑惠匀, 研究与咨询部主管 (新加坡)

Second consecutive quarter of modest industrial rental correction a firmer sign of market nearing bottom

The uplift in trade and economic activity that started since end-2016 is finally translating into improved industrial occupier sentiment, paving the way for the potential bottoming of industrial property market in 2018.

 

This is taking cue from JTC's industrial property market statistics released today which showed the all-industrial property rental index posted a second consecutive quarter of modest 0.1% q-o-q decline, while prices recorded a similarly mild 0.1% q-o-q correction in 1Q18. These had come on the back of a second consecutive quarterly decline in the islandwide vacancy rate to 11.0% as of 1Q18.

 

We have observed a pick-up in leasing enquiries from industrialists reviewing their real estate options in 1Q18. This stems from improved business sentiment amid the sustained steady economic, manufacturing and trade activities. The perception that rents are bottoming has prompted some occupiers to act fast to secure their premises ahead of rental recovery. In fact, some have entered into forward lease renewals in anticipation of future rental increases.

 

Business parks the star performer

 

The business park segment remained the star performer, standing out as the only industrial asset class to record rent growth for the fourth consecutive quarter. As of 1Q18, business park rents have recovered by 6.9% in the last one year. This was underpinned by steady demand amid the growth of the digital economy, lack of new supply as well as the filtered-through effect from the rise in office rents.

 

Demand continued to stem from qualifying users from the science, technology and media industries during the quarter. For example, we understand a technology firm took up more than 50,000 sq ft at a city fringe location in 1Q18 while another technology/e-commerce company is sourcing for additional business park space (also in excess of 50,000 sq ft) due to expansion needs.

 

Market could bottom by end-2018

 

We are optimistic that the industrial property market will bottom by the end of 2018. This takes into account tapering pipeline supply that will allow demand to play catch up amid the positive economic outlook, barring any unforeseen external shocks.

 

JTC's data showed that another 1.4 million sqm gross floor area of new industrial space is expected to come on-stream for the rest of 2018. This works out to about 1.1 to 1.3 million sqm of estimated net floor area (assuming 80% to 90% efficiency), significantly lower than 2017's net new supply of 1.9 million sqm.

 

The business park segment is expected to continue to outperform the general market given steady demand, while logistics/warehouse rents could potentially see some upside by year-end on the back of an expected reduction in vacant stock.

 

 

– ends –

 

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.

 

JLL has over 50 years of experience in Asia Pacific, with over 37,000 employees operating in 96 offices in 16 countries across the region. The firm won the 'World's Best' and 'Best in Asia Pacific' International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics.  www.ap.jll.com.