Singapore industrial a picture of stability with cautious optimism ahead for 2019
Tay Huey Ying, Head of Research and Consultancy, Singapore 郑惠匀, 研究与咨询部主管 (新加坡)
A positive start to 2019
JTC’s latest statistics for 1Q19 showed Singapore’s industrial property market starting the year on a positive note as net absorption of industrial space improved quarter-on-quarter and year-on-year. Except for the multi-user factory segment, all other industrial segments tracked by the JTC posted improvement in net absorption in 1Q19.
This, coupled with the slowdown in new completions in 2018 and the relatively low net space addition in 1Q19, had allowed demand to play catch up. Consequently, the island-wide all-industrial occupancy rate held stable at 4Q18’s level of 89.3%.
Against this backdrop, the all-industrial property rental index was unchanged for the second consecutive quarter, while the all-industrial property price index (which tracks price movements of single-user and multi-user factories) remained relatively stable for the fifth successive quarter.
This has affirmed JLL’s earlier observation that Singapore’s industrial property market has bottomed.
Cautious optimism in 2019 amid macro-economic challenges
We are cautiously optimistic that the industrial property market will hold firm in 2019.
Although 2019’s supply could more than double from 2018’s net addition of around 545,000 sqm going by JTC 1Q19’s statistics, more than two-thirds of 2019’s pipeline supply is expected to be from single-user factory developments meant predominantly for owner-occupier purposes.
Occupier demand, on the other hand, should remain healthy although the ongoing macro-economic challenges including the widely-anticipated slowdown in manufacturing output growth in 2019 and the lingering global trade crisis could put businesses on a cautious mode and curb expansion plans.
Industrial developments with higher building specifications catering to the needs of new economy firms (e.g. technology companies) and firms from higher value-added industries should remain sought after.
In particular, we expect the business park segment to outperform the rest of the market. With Ascent 5 already fully leased and with no other multiple-user facility completing for the rest of the year, the availability of quality business park space for lease is expected to be tight in 2019. This should underpin a faster pace of rental growth in 2019, possibly by up to 5%, barring any unforeseen external shocks.
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