Industrial occupancy rate inches up to 90% QoQ in Q2
This is on the back of the multiple-user factory and warehouse segments.
The overall occupancy rate in the industrial property market increased by 0.2 percentage points to 90% in the second quarter compared to the first three months of 2022, according to a JTC report.
“The increase was driven by the multiple-user factory and warehouse segments as new demand exceeded new supply,” JTC said in a statement.
However, the occupancy rate fell by 0.2 percentage points compared to last year due to previously delayed completions coming on stream in recent quarters, it said.
JTC said that total available stock increased by 322,000 square metres (sqm) in the second quarter, compared to the previous quarter, adding that the 655,000 sqm rise in available space in the first half of the year was the “largest half-yearly” increase since 2017.
Price and rental indices both rose 1.5% quarter-on-quarter. Compared to the previous year, price and rental indices jumped 5.2% and 3.4%, respectively.
“Growth during the second quarter was supported by output expansions in electronics and precision engineering, with continuing global demand for semiconductors and semiconductor equipment,” said Leonard Tay, head of Research at Knight Frank Singapore.
Tay added that the strengthening of the Singapore dollar supported stockpiling activity, mitigating the rise in costs. This also supported the demand for logistic space as warehouse occupancies rose to 90.9% in Q2, from 90.3% in Q1.
In the second half of 2022, JTC expects around 1.6 million sqm of new industrial space will be completed. Of which, 43% were from single-user factory space, 30% from multiple-user factory space, and 27% from warehouse and business park space.
“Barring any sharp slowdown in the global economy, demand for industrial space in 2022 is expected to be robust and occupancy relatively stable,” JTC said.
Catherine He, head of Research, Singapore at Colliers, said rising commodity prices, disruptions to the global supply chain, slowing growth due to increasing interest rates in developed economies, the resurgence of COVID and the emergence of other virus strains could dampen sentiment and the industrial sector.
But in the long term, industrial space demand will remain driven by tailwinds like Singapore’s rising focus on high-value manufacturing and biomedical sectors.
Other risks which could dampen sentiments and the industrial sector include rising commodity prices, disruptions to global supply chains, slowing growth due to rising interest rates in developed economies, as well as the resurgence of COVID and emergence of other viruses strains, which may re-introduce restrictions and disrupt labour supply.
“As such, Colliers expects industrial rents to grow by between 2% and 4% this year. Industrial prices, on the other hand, could grow at a higher clip between 5% and 7% on the back of growing interest in the defensive nature of industrial assets and their limited availability,” He said.
Tay also said that prices and rentals for industrial space remain on track to grow 3% to 5% for the whole year, noting that “bright spots” continue to highlight the industrial market, attracting investment and expansion of semiconductor manufacturers in Singapore.
He added the continued demand for chips and electronics globally will also boost demand for electronics, whilst the transport engineering cluster will benefit from the increased demand for air travel.
Meanwhile, Lam Chern Woon, head of Research and Consulting at Edmund Tie, said they expect about 1.95 million sqm of industrial space to come onstream for the remaining of 2022 and 2023, rivalling the 1.96 sqm recon completion in 2014.
“While the headline supply pipeline may appear daunting, in the near to mid-term, with the greatest supply pressure is loaded in the single-user factory segment. However, this is less of an issue given that the supply is developed for own use application by industrialists,” Lam said.
He added that they maintain rental growth forecasts of 7% to 8% for modern warehouse and quality factory spaces, whilst rents of business parks in the central region are seen to rise by 4% this year, as the workforce returns to office fully and the office market recovery.