Brenda Ong, Executive Director of Industrial & Logistics Services, CBRE
Based on JTC’s Q2 2018 statistics, overall industrial rental index eased by 0.1% q-o-q, unchanged from the previous quarter. Signs of stabilisation can be seen in the market. Rents for multiple-user factories saw its first uptick in 12 quarters, increasing by 0.2% q-o-q. This was despite a 0.5 percentage point increase in vacancy rates, to 14.0%.
As the market is still adjusting to the excess new industrial space, rents for single-user factories and warehouses continued to decline albeit marginally, at -1.6% and -0.5% q-o-q respectively. The softer industrial market has allowed cost conscious tenants to lock in lower signing or renewal rates. Some large occupiers have commenced lease renewals much ahead of expiry. While most occupiers focused on consolidation, there were several occupiers who encouragingly undertook expansion. Those in the semiconductor, petrochemicals, logistics trades were most active in expansion, albeit at a cautionary pace.
The medium term outlook for the industrial market is expected to be stable. Economic indicators remain healthy evidenced by a 10.2% y-o-y expansion in industrial output for Q2 2018, which marked the ninth consecutive quarter of growth. A tapering supply pipeline over the next 2-3 years will allow the market to recalibrate the current demand and supply imbalance. This should eventually shore up occupancy rates and arrest the rate of rental decline.
However, potential risks remain. Despite the robust performance in Singapore’s industrial production, there are market uncertainties arising from the U.S. and China trade tensions. A prolonged trade war could have negative implications for global trade and business sentiments.
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