sin02

Singapore industrial space rents and prices up in Q4 from Q3, but down on-year

PRICES and rentals of industrial space edged up quarter on quarter in Q4 2020 as a delay in new completions nudged the occupancy rate upwards, although prices and rents were still down year on year.

According to data released by industrial land and infrastructure agency JTC Corp on Thursday, prices of industrial space were up 1 per cent from Q3 2020, while rents inched up 0.1 per cent. This came as the occupancy rate climbed 0.3 percentage point to 89.9 per cent, fuelled by an increase in demand for storage while new completions were delayed as the pandemic impacted construction activities.

Compared to the previous year, however, prices of industrial space were 2.7 per cent lower, while rents were down 1.5 per cent.

Meanwhile, the occupancy rate increased 0.7 percentage point from the previous year, bucking the trend. Going by segment, nearly every one reported a quarter-on-quarter increase in the occupancy rate in Q4 2020, except for single-user factory, which was flat at 91 per cent.

The total available stock in Q4 2020 rose by 38,000 square metres (sq m), down sharply from the average quarterly increase of 188,000 sq m racked up over the last three years. At 357,000 sq m, 2020 saw the lowest yearly increase in available stock since 2005.

As at end December, around 2.7 million sq m of new industrial space was expected to be completed in 2021, with 43 per cent of the upcoming supply being single-user factory space. According to JTC, about 0.5 million sq m of projects were delayed from last year as a result of the pandemic.

“Delays in completion could continue for some industrial building projects, as the construction industry faces constraints on manpower and raw material supplies due to the pandemic,” JTC warned.

In Q4 2020, JTC allocated a total of 38,000 sq m of ready-built facilities (RBF) space to industrialists, which included 27,700 sq m of high-rise space and 5,100 sq m of workshop space.

Total RBF returns in Q4 2020 was 55,100 sq m, of which 27,000 sq m was high-rise space and 20,700 sq m was land-based factory space. “About 55 per cent of the total returns were due to natural expiries or companies consolidating their operations,” JTC said.

Looking ahead, demand for industrial space could gain momentum as the economy recovers, JTC highlighted. Still, prices and rentals could remain stable on the back of an increase in supply from new completions, as long as the recovery isn’t derailed by a worsening in the pandemic.

Tricia Song, head of research (Singapore) for Colliers International, said: “We believe the overall Singapore industrial market will stabilise and recover in 2021, with some segments performing better.”

She projects rents for warehouses could increase by 1.3 per cent this year as the growth in e-commerce fuels demand for logistics spaces. Meanwhile, rents for business parks and high-spec segments are seen as recovering in 2021 after easing last year, thanks to improving business confidence and the technology, media and telecommunications sector.

Meanwhile, Leonard Tay, head of research at Knight Frank Singapore, reckons that prices and rents for multiple-user factories are likely to face downward pressure of 5 per cent this year as government fiscal support tapers off since these are typically occupied by smaller companies. Single-user factories may do slightly better as these are generally used by manufacturers, he said.

Mr Tay added: “With the distribution of Covid-19 vaccines, the city-state’s strategic location and developed IT infrastructure would position Singapore as a key warehousing and storage hub. Logistics properties are expected to benefit, with price and rent increases ranging from 1 to 3 per cent in 2021.”

Source: https://www.businesstimes.com.sg/real-estate/singapore-industrial-space-rents-and-prices-up-in-q4-from-q3-but-down-on-year