Ms Brenda Ong, Executive Director of Industrial & Logistics Services at CBRE:
- Despite the cloudy trade outlook, the industrial market still exhibited signs of resilience in Q2 2019. For the first time in 17 consecutive quarters, the JTC All Industrial Rental Index saw its first uptick of 0.1% q-o-q, as opposed to last quarter when it remained unchanged. This was on the back of a healthy occupancy level of 89.3%, unchanged from the previous quarter.
- The factory submarket showed some improvements in occupier performance this quarter. The JTC Single-user Factory Rental Index rose by 0.5% q-o-q while the JTC Multiple-user Factory Rental Index inched upwards by 0.1% q-o-q. While this was a surprising improvement from the previous quarters*, CBRE is of the view that this may not be sustainable – given the weak macroeconomic indicators.
* The previous quarter witnessed sluggish performance whereby the JTC Single-user Factory Rental Index eased 0.6% q-o-q and the JTC Multiple-user Rental Index edged downwards by 0.1% q-o-q.
- Against the introduction of 1.70 mil sq ft of net supply during this quarter, the occupancy rate for single-user factories dipped by 0.3 percentage points to 90.9%. On the other hand, multiple-user factory occupancy rates rose by 0.9 percentage points to 87.2%. This could have been the result of JTC’s efforts to limit the speculative supply in the market.
- The performance of the warehouse sector showed a slight slowdown in this quarter, as illustrated by a dip of 0.2% q-o-q in the JTC Warehouse Rental Index. The warehouse occupancy rate fell 0.4 percentage points to 88.7%. Consequently, it has been observed that landlords are taking a more flexible stance in rental negotiations to improve occupancy.
- A total of 40.02 mil sq ft of vacant factory space and 13.15 mil sq ft of vacant warehouse space correspond to vacancy rates of 10.3% and 11.3%, respectively. It should be noted that a large portion of these vacant spaces are small and fragmented, which do not cater to occupiers who mostly prefer large, contiguous spaces. Meanwhile, conventional factory space will continue to face difficulties in finding tenants. As such, the industrial market might remain a two-tiered market, with assets of better specifications performing better in terms of rents and occupancy rates.
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CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.