Desmond Sim, Head of Research, Singapore & Southeast Asia
Based on JTC’s Q3 2018 statistics, overall industrial occupancy rate increased by 0.4% q-o-q to 90.0%. Improvement in occupancies were mainly from the single-user factory, business parks and warehouses. In Q3 2018, there was an uptick in leasing volume for both islandwide factories and warehouses on a y-o-y basis. Factories leasing volume increased by 7.1% y-o-y to $10.851 mil. There was a noticeable increase in demand for storage space in recent quarters, driven by a build-up of inventory from the growing gap between higher output and lower exports. JTC statistics showed that warehouse leasing volume saw growth of 82.3% y-o-y to $5.553 mil. This contributed to the stronger net absorption for warehouse space in Q3 2018 at 1.81 mil sq. ft., which shored up occupancy by 0.9 percentage points to 89.4%.
The strong occupier performance was not uniform across all buildings, with new buildings of higher specifications outperforming the older facilities. Some tenants had taken advantage of the lower rents to move operations into these new facilities. With the improved occupancy, some landlords are maintaining rents. Overall industrial rents eased at the same pace as the previous quarter, at -0.1% q-o-q. After 13 consecutive quarters of decline, warehouse rents held steady for the first time in Q3 2018.
This could possibly be the calm before the storm arising from the China-US trade war. Singapore may be affected by this bilateral trade war as there are Singapore exports that head to China for reassembly which may eventually head to the US. Nonetheless, positivity around South East Asia trade remains as Singapore is a key logistics hub in the SEA region.
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