Mr Desmond Sim (沈振伦), Head of Research, Southeast Asia:
• In Q4 2019, the JTC All Industrial Rental Index remained flat on a q-o-q basis while occupancy rate fell marginally by 0.1 percentage points to 89.2%. With trade indicators recording improvements in December – NODX increased by 2.4% y-o-y, its first expansion since February; while PMI rose to 50.1, its first expansion since April – industrial rents appear to have stabilised alongside these early signs of a possible economic recovery.
• However, the factory submarket displayed mixed performances this quarter. The JTC Single-User Factory Rental Index inched up by 0.1% q-o-q, whereas occupancy rate fell by 0.3 percentage points q-o-q to 90.8%, partly because of excess supply from previous quarters which is still in the midst of being absorbed by the market. The JTC Multiple-User Factory Rental Index on the other hand eased by 0.1% q-o-q, which can be mainly attributed to the West region where a large pool of existing vacant stock remains; this is despite that the islandwide occupancy rate increased by 0.4 percentage points q-o-q to 87.5%.
• The warehouse sector saw an improvement from its slowdown from preceding quarters, with the JTC Warehouse Rental Index edging up by 0.1% q-o-q. However, it was also noted that warehouse occupancy dipped marginally by 0.1 percentage points q-o-q to 88.0%. Nonetheless, it is likely that the tight upcoming warehouse supply will lend support to occupancy.
• Moving forward, with overall industrial rents remaining unchanged this quarter, there is some optimism that rents may have bottomed out. CBRE Research is of the view that warehouse rents are poised to be more resilient, supported by a limited supply pipeline. Meanwhile, factory rents are expected to stay flat in 2020, suppressed by a prevailing vacancy volume of 40.1 million sq ft and a substantial amount of upcoming multiple-user factory stock.
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