Industrial property market recovery soldiers on in spite of escalating trade wars

Tay Huey Ying, Head of Research and Consultancy, Singapore 郑惠匀, 研究与咨询部主管 (新加坡)

October 25, 2018


Recovery continues in spite of escalating trade wars

Singapore’s industrial property market continues to display signs of bottoming, based on JTC’s 3Q18 statistics released today.

The all-industrial property price index (which tracks price movements of single-user and multi-user factories) turned positive for the first time in 14 quarters after staying flat in 2Q18.  Rent-wise, the all-industrial property rental index recorded a fourth straight quarter of modest 0.1% q-o-q contraction. Encouragingly, rents of warehouses held steady for the first time after 13 consecutive quarters of decline.

The islandwide occupancy rate also reached a six-quarter high of 89.1% in 3Q18, following a reduction in net new supply and higher net absorption.

The mending business sentiment amid the protracted strong manufacturing sector and trade performance of the past several quarters, coupled with slowing supply growth, has helped to stabilise Singapore’s industrial property market. 

While today’s report card for the industrial property market is generally within expectations, it was surprising that JTC’s rental index for business park space reflected a slight 0.1% q-o-q fall in 3Q18 that ended five consecutive quarters of growth. JLL’s research showed that, underpinned by steady demand and sustained growth in office rents, the average monthly gross rents of business park space strengthened for the fourth consecutive quarter to reach SGD 3.84 per sq ft per month as of 3Q18, after firming by 0.5% q-o-q.

Market turnaround foreseen by end-2019

Barring a worsening of the external environment or other unforeseen external shocks, we are hopeful that all industrial property indicators (rents and prices) may turnaround by end-2019 as the low pipeline supply in 2018 and 2019 will allow demand to play catch up with supply.

According to JTC’s 3Q18 data, another 0.5 million sqm gross floor area of new industrial space is expected to be ready in 4Q18. Including the net addition of 0.4 million sqm net floor area in the first three quarters of 2018, this works out to around 0.9 million sqm of estimated net floor area in 2018 (assuming 80% to 90% efficiency for the 4Q18 supply pipeline), significantly lower than 2017’s net new supply of 1.9 million sqm. 2019’s pipeline supply of around 1.3 million sqm gross floor area or about 1.0 to 1.2 million sqm of estimated net floor area (assuming 80% to 90% efficiency) is also lower than the average annual net new supply of 1.4 million sqm net floor area for the 10 years from 2008 to 2017.

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