Can the industrial real estate sector weather the tariff storm?

A slowdown in global trade could put downward pressure on rents.

Analysts remain cautious about whether the industrial real estate sector can navigate the tariff storm, commenting on the Q1 2025 industrial statistics released by the JTC.

Recent data from JTC said that the rental index rose by 0.5% from the previous quarter and 2.3% from a year earlier — the smallest annual rental growth since 2021, indicating a gradual cooling in rental momentum.

Dr Chua Yang Liang, Head of Research & Consultancy, Southeast Asia at JLL, said that annually, the 2.3% decelerates from the 3.5% year-on-year in Q4 2024.

“As we had flagged previously, the JTC rental index has been slowing since the end of 2023, both on a quarterly and yearly basis. This recent deceleration cements our view that the retardation is structural, given the repivoting of our industrial base since 2022. The manufacturing sector's contribution to the overall GDP has been falling from 22.6% to a low of 18.6% by Q2 2024,” Liang said.

Leonard Tay, Head, Research at Knight Frank Singapore that based on advance estimates from the Ministry of Trade and Industry (MTI), the manufacturing sector expanded 5% YoY in Q1 2025, but on a quarterly basis, the manufacturing sector shrank 4.9% in Q1 2025, a worrying decline from the flat growth in the previous quarter.

“Whilst the industrial real estate sector has been characterised by consistent stability and resilience, it remains to be seen whether it can weather the uncertainty that has ratcheted up with the US-initiated tariffs,” Tay added.

Lee Sze Teck, Senior Director, Data Analytics at Huttons, the manufacturing sector is likely to see further slowdown for the rest of 2025 if global trade slows.

“The tariffs will raise the cost of the finished goods, and it may be passed on in part or in entirety to the importing country. The higher cost of the final product may reduce consumer demand. This will have repercussions down the entire supply chain from production to shipping. With lower trade, the services sector, from trade financing to insurance, will be impacted,” Teck said.

Teck’s outlook for the industrial market is cautious, with prices and rents of industrial space expected to be flat in 2025.

Meanwhile, for Tay, even though industrial prices and rents are steady at the moment, the current tariff announcements and those in the days ahead have created and continue to create heightened uncertainty. Tay believes that the global economic and political outlook has taken a turn for the worse, with more volatility expected from the US Trump administration.

“For an export manufacturing economy such as Singapore, the impact of the sweeping tariffs in the immediate term could cause factory rental growth downwards from the original projection of 1% to 3% in 2025 to 0% to 2%,” Tay said.