Warehouse demand saw sharp rebound in 2Q20
Stockpiling needs could continue to provide support for warehouse demand in the short term
JTC’s 2Q20 industrial property market statistics showed that Singapore’s industrial property rents and prices fell at a faster pace of 0.7% and 1.1% quarter-on-quarter (q-o-q) in 2Q20, respectively. These are the largest q-o-q declines in rents and prices since 2017.
The overall declines in rents and prices were despite the 0.2 percentage points q-o-q increase in Singapore’s industrial property occupancy rate to 89.4% in 2Q20. The slightly higher occupancy rate was mainly due to fewer space completions amid disruptions to construction activities arising from the Circuit Breaker and COVID-19 outbreak in the foreign workers’ dormitories, as well as higher net absorptions from the single-user factory and warehouse segments.
In particular, demand for warehouse space was healthy in 2Q20, underpinned by renewals and short-term leasing requirements to accommodate medical supplies, food and consumer items (for example, from e-retailers), as safety concerns and movement controls fuelled a spike in e-commerce activities and increased stockpiling requirements. On the other hand, leasing enquiries for business park space slowed down during the quarter.
In the coming quarters, continued macroeconomic headwinds are likely to see most businesses staying cautious on their space requirements. However, stockpiling needs could continue to provide support for warehouse demand amid risks of new waves of COVID-19 outbreak and repeated lock downs. That said, occupiers are likely to stay rent sensitive amid the deep economic recession. As such, we expect both rents and prices to continue to trend down across all industrial property types in the next six months.