Singapore
Commentary on JTC's Announcement on Q2 2024 Statistics
July 25, 2024
Associated Contact
Melvin Lin
Head of Marketing & Communications, Singapore
By Tricia Song (宋明蔚), Head of Research, Southeast Asia, CBRE
• The JTC All Industrial Rental Index rose by 1.0% q-o-q in Q2 2024, with momentum easing from the previous increase of 1.7% q-o-q in Q1 2024. This marks the 15th straight quarter of rental increase. The JTC All Industrial Rental Index has also grown by 22.1% since the trough in Q3 2020.
• Among the various market segments, rents for the multi-user factory segment increased by 1.5%, accelerating from last quarter’s growth of 1.3%. Multi-user factories were the only market segment to see an acceleration as momentum eased for the other market segments. With no major facility completions during the quarter and healthy net absorption by occupiers, the occupancy rate for Q2 2024 rose by 0.8 ppt to 91.3%. CBRE Research attributes the leasing demand to be driven by technology and manufacturing companies, as they continue to seek high specifications facilities for their production capabilities.
• Rents for the single-user factory segment increased by 1.3%, moderating from the 2.1% q-o-q growth seen during the previous quarter. The rental increase can be attributed to recent completions that brought up average rents. In Q2 2024, major project completions were Applied Material’s new 0.69 mil sq. ft. greenfield facility at Tampines Industrial Crescent, as well as the remaining phase in Google’s data centre campus at Lok Yang Way. With healthy move-in by occupiers in Q2 2024, the occupancy rate increased by 0.2 ppt to 88.0%.
• Rents for the warehouse segment increased by 0.5%, as momentum tapered down from last quarter’s 2.0% growth. In the absence of major warehouse completions during the quarter amid steady demand, the occupancy rate increased by 0.2 ppt to 91.3%. Although the warehouse segment continues to see resilient occupancy rates, CBRE Research understands that logistics occupiers are increasingly cost sensitive and resistant to higher rents. The cost pressures can be partly attributed to the Red Sea crisis. With vessels taking a detour to avoid Houthi attacks, this has resulted in elevated freight rates and port congestions in Singapore, adding to supply chain challenges for logistics operators. That said, landlords remain keen on redevelopment opportunities that seek to convert traditional warehouse developments into prime logistics facilities.
• Lastly, rents for business parks declined by 0.1% q-o-q in Q2 2024, moderating from the 2.1% q-o-q increase in Q1 2024. According to JTC data, vacancy rate declined slightly from a 22.0% in Q1 2024 to 21.7% in Q2 2024. That said, CBRE Research stresses that performance for the business parks segment is patchy; there lies a divergence in rental and occupancy depending on the micro-market, age and specification of the building. For example, according to JTC data compiled by CBRE Research, one-north averaged a vacancy of 9.0% in Q2 2024, but it can go up to about 30% in the East and close to 40% in International Business Park/Jurong.
• Prices reversed upwards to a 1.2% q-o-q increase this quarter, after the 0.2% decrease in the All-Industrial Price Index in Q1 2024. This marks the first quarter of prices increasing at a faster rate than rents since Q1 2022. The increase was anchored by the multi-user factory segment as it saw a 1.7% q-o-q growth in Q2 2024, accelerating from the 0.5% q-o-q increase in the previous quarter. The single-user factory segment also saw a 0.3% q-o-q increase in Q2 2024, reversing from the 1.0% q-o-q decline in the last quarter. While investor sentiment in early 2024 was dampened due to uncertainty over the timing of interest rate cuts, sentiment has improved in recent months. Investors continue to display a strong interest for leasehold industrial assets due to the positive carry, as well as selected freehold strata industrial developments that were actively transacted in H1 2024.
• As at end-Jun 2024, about 8.5 mil sq. ft. of new industrial space (or around 1.5% of total stock) is scheduled for completion over the second half of 2024. Of the upcoming supply, the single-user factory segment makes up 70%, while business park space accounts for 15%. The remainder of the pipeline comprises warehouses and multi-user factories at 11% and 4% respectively.
• The JTC All Industrial Rental Index rose by 1.0% q-o-q in Q2 2024, with momentum easing from the previous increase of 1.7% q-o-q in Q1 2024. This marks the 15th straight quarter of rental increase. The JTC All Industrial Rental Index has also grown by 22.1% since the trough in Q3 2020.
• Among the various market segments, rents for the multi-user factory segment increased by 1.5%, accelerating from last quarter’s growth of 1.3%. Multi-user factories were the only market segment to see an acceleration as momentum eased for the other market segments. With no major facility completions during the quarter and healthy net absorption by occupiers, the occupancy rate for Q2 2024 rose by 0.8 ppt to 91.3%. CBRE Research attributes the leasing demand to be driven by technology and manufacturing companies, as they continue to seek high specifications facilities for their production capabilities.
• Rents for the single-user factory segment increased by 1.3%, moderating from the 2.1% q-o-q growth seen during the previous quarter. The rental increase can be attributed to recent completions that brought up average rents. In Q2 2024, major project completions were Applied Material’s new 0.69 mil sq. ft. greenfield facility at Tampines Industrial Crescent, as well as the remaining phase in Google’s data centre campus at Lok Yang Way. With healthy move-in by occupiers in Q2 2024, the occupancy rate increased by 0.2 ppt to 88.0%.
• Rents for the warehouse segment increased by 0.5%, as momentum tapered down from last quarter’s 2.0% growth. In the absence of major warehouse completions during the quarter amid steady demand, the occupancy rate increased by 0.2 ppt to 91.3%. Although the warehouse segment continues to see resilient occupancy rates, CBRE Research understands that logistics occupiers are increasingly cost sensitive and resistant to higher rents. The cost pressures can be partly attributed to the Red Sea crisis. With vessels taking a detour to avoid Houthi attacks, this has resulted in elevated freight rates and port congestions in Singapore, adding to supply chain challenges for logistics operators. That said, landlords remain keen on redevelopment opportunities that seek to convert traditional warehouse developments into prime logistics facilities.
• Lastly, rents for business parks declined by 0.1% q-o-q in Q2 2024, moderating from the 2.1% q-o-q increase in Q1 2024. According to JTC data, vacancy rate declined slightly from a 22.0% in Q1 2024 to 21.7% in Q2 2024. That said, CBRE Research stresses that performance for the business parks segment is patchy; there lies a divergence in rental and occupancy depending on the micro-market, age and specification of the building. For example, according to JTC data compiled by CBRE Research, one-north averaged a vacancy of 9.0% in Q2 2024, but it can go up to about 30% in the East and close to 40% in International Business Park/Jurong.
• Prices reversed upwards to a 1.2% q-o-q increase this quarter, after the 0.2% decrease in the All-Industrial Price Index in Q1 2024. This marks the first quarter of prices increasing at a faster rate than rents since Q1 2022. The increase was anchored by the multi-user factory segment as it saw a 1.7% q-o-q growth in Q2 2024, accelerating from the 0.5% q-o-q increase in the previous quarter. The single-user factory segment also saw a 0.3% q-o-q increase in Q2 2024, reversing from the 1.0% q-o-q decline in the last quarter. While investor sentiment in early 2024 was dampened due to uncertainty over the timing of interest rate cuts, sentiment has improved in recent months. Investors continue to display a strong interest for leasehold industrial assets due to the positive carry, as well as selected freehold strata industrial developments that were actively transacted in H1 2024.
• As at end-Jun 2024, about 8.5 mil sq. ft. of new industrial space (or around 1.5% of total stock) is scheduled for completion over the second half of 2024. Of the upcoming supply, the single-user factory segment makes up 70%, while business park space accounts for 15%. The remainder of the pipeline comprises warehouses and multi-user factories at 11% and 4% respectively.
Outlook
• According to advance estimates from the Ministry of Trade and Industry (MTI), Singapore’s economy continued its growth in Q2 2024 as GDP rose by 0.4% q-o-q seasonally adjusted, slightly faster than the 0.3% q-o-q increase in Q1 2024. During the quarter, the manufacturing sector grew by 0.5% y-o-y, reversing from the 1.7% y-o-y contraction in Q1 2024.
• The manufacturing recovery continues to be uneven, as all manufacturing clusters recorded output expansions, except biomedical manufacturing and precision engineering. Looking ahead to H2 2024, Singapore’s electronics sector is expected to gain momentum and lead the manufacturing recovery.
• CBRE Research has observed expansionary activity cool as occupiers are cautious about elevated costs in this environment. While demand and enquiries for industrial space continue to be healthy, some occupiers have opted to renew their leases and defer their relocation plans. That said, selected occupiers are seizing the opportunity to relocate to higher-spec facilities or fitted options on the market.
• As for the prime logistics segment, rents have increased by 42.7% since the trough in Q1 2020, presenting challenges for occupiers due to the elevated cost environment. While there remains to be limited options for occupiers on the market, prime logistics supply is expected to peak in 2025. This presents a window of opportunity for occupiers to secure quality prime logistics space in the market. While some landlords are prepared to adjust their rental expectations to favour higher occupancy rates, selected landlords with newer warehouses and choice specifications are in a stronger position to secure quality tenants.
• Performance for business parks held steady in H1 2024. That said, business park rents are expected to face increased pressure in the latter half of the year. This pressure will stem from rising vacancies contributed by non-renewals on lease expiry in specific buildings. Furthermore, a higher volume of completions in H2 2024 – 2025 will add to a more competitive leasing environment. Prevailing economic challenges, high-cost environment and continued work-from-home measures will also continue to dilute space requirements of occupiers.
Read JTC's Industrial Property Market Statistics for 2Q 2024 here.• According to advance estimates from the Ministry of Trade and Industry (MTI), Singapore’s economy continued its growth in Q2 2024 as GDP rose by 0.4% q-o-q seasonally adjusted, slightly faster than the 0.3% q-o-q increase in Q1 2024. During the quarter, the manufacturing sector grew by 0.5% y-o-y, reversing from the 1.7% y-o-y contraction in Q1 2024.
• The manufacturing recovery continues to be uneven, as all manufacturing clusters recorded output expansions, except biomedical manufacturing and precision engineering. Looking ahead to H2 2024, Singapore’s electronics sector is expected to gain momentum and lead the manufacturing recovery.
• CBRE Research has observed expansionary activity cool as occupiers are cautious about elevated costs in this environment. While demand and enquiries for industrial space continue to be healthy, some occupiers have opted to renew their leases and defer their relocation plans. That said, selected occupiers are seizing the opportunity to relocate to higher-spec facilities or fitted options on the market.
• As for the prime logistics segment, rents have increased by 42.7% since the trough in Q1 2020, presenting challenges for occupiers due to the elevated cost environment. While there remains to be limited options for occupiers on the market, prime logistics supply is expected to peak in 2025. This presents a window of opportunity for occupiers to secure quality prime logistics space in the market. While some landlords are prepared to adjust their rental expectations to favour higher occupancy rates, selected landlords with newer warehouses and choice specifications are in a stronger position to secure quality tenants.
• Performance for business parks held steady in H1 2024. That said, business park rents are expected to face increased pressure in the latter half of the year. This pressure will stem from rising vacancies contributed by non-renewals on lease expiry in specific buildings. Furthermore, a higher volume of completions in H2 2024 – 2025 will add to a more competitive leasing environment. Prevailing economic challenges, high-cost environment and continued work-from-home measures will also continue to dilute space requirements of occupiers.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2024 revenue). The company has more than 140,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of 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.