By Desmond Sim, Head of Research, Southeast Asia
- The COVID-19 outbreak continued to place downward pressure on the industrial sector in Q3 2020, as the JTC All Industrial Rental Index fell for the third consecutive quarter by 0.9% q-o-q. Nonetheless, macro industrial indicators demonstrated positive blips – manufacturing output rose by 13.7% y-o-y in August 2020 and NODX edged up by 5.9% y-o-y in September 2020, while PMI expanded for the third consecutive month at 50.3 in September 2020.
- Rental declines were noted across both the factory and warehouse submarkets. The JTC Single-User Factory Rental Index slid by 0.7% q-o-q, while the JTC Multiple-User Factory Rental Index decreased by 1.1% q-o-q. While there has been some demand for buildings with higher specifications, rents may be weighed down by older non-high specs buildings, which form a larger proportion of overall factory stock. Similarly, the JTC Warehouse Rental Index fell by 1.1% q-o-q in Q3 2020, which could partly be attributed to the easing of government stockpiling efforts.
- Amid construction delays due to the pandemic, overall industrial occupancy increased by 0.2 percentage points in Q3 2020. Single-user factory occupancy fell by 0.1 percentage points to 91.0%; whereas multiple-user factory occupancy rose by 0.3 percentage points to 87.8%, contributed by the postponement of new supply.
- Meanwhile, warehouse occupancy sustained its expansion from the previous quarter by 0.8 percentage points to 89.1% in Q3 2020. CBRE Research has similarly observed an increase in warehouse occupancy, underpinned by strong demand from e-commerce, third-party logistics and food logistics players. This is especially for prime logistics buildings, most of which are approaching full occupancy.
- Notably, a larger reduction of upcoming supply was reported in Q3 2020, with 0.6 mil sq ft of total industrial supply expected for the rest of the year as compared to 1.3 mil sq ft previously reported in Q2 2020. With most factory and warehouse completions already being pushed back by three to six months, CBRE Research expects further construction delays moving forward.
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