Industrial sector holds firm with 1.1m sqm supply on the way: Colliers

The JTC All Industrial rental index rose for the 18th consecutive quarter, increasing 0.5% QoQ in Q1 2025.

Singapore’s industrial property sector is bracing for a substantial increase in supply over the next three years, with average annual additions expected to reach 1.1 million square metres, significantly outpacing recent demand levels.

According to Colliers’ Q1 2025 Industrial Report, this comes as average demand over the past three years stood at just 0.6 million sqm annually.

Out of the 2.4 million sqm of industrial space slated for 2026 and 2027, 28% will be warehouses and 52% will be single-user factories, the majority of which are already pre-committed, easing concerns about oversupply in those categories.

Despite the influx, Colliers remains cautiously optimistic about the market’s resilience. “Singapore’s overall value proposition of a proactive government — offering companies incentives and support, efficient infrastructure and a skilled talent pool — will ensure that it remains an attractive hub for industries,” said Nicolas Menville, Executive Director and Head of Industrial Clients at Colliers Singapore.

The JTC All Industrial rental index rose for the 18th consecutive quarter, increasing 0.5% QoQ in Q1 2025. This brings rents to their highest level since Q2 1996, representing a 23.7% increase since the trough in Q3 2020.

However, the price index's growth slowed to 1.5% QoQ, from 2.0% in the previous quarter.

Occupancy remained unchanged at 11.0% vacancy island-wide, though the warehouse and business park segments saw declines.

Business park occupancy dropped by 200 basis points to 75.9%, as older facilities faced growing vacancies. “This could lead to occupancy and rents at older developments coming under pressure as they face obsolescence,” the report noted.

Whilst external factors like trade tensions and tariffs may dampen sentiment, they could also work in Singapore’s favour. “The proposed tariffs on Chinese goods are expected to hasten the relocation of manufacturing supply chains to Southeast Asia, with Singapore being a key beneficiary,” said Catherine He, Head of Research at Colliers Singapore.

Colliers also highlighted that Singapore's role as a major re-export hub and its geopolitical neutrality make it a preferred destination for companies diversifying their supply chains.

Given the expected supply surge and global uncertainties, Colliers advised landlords to adopt flexible leasing strategies. “Landlords could be more flexible to rental negotiations and offer flexible lease terms or incentives to attract or retain tenants,” the report stated.

Tenants, meanwhile, are urged to “carefully evaluate space options and negotiate with landlords for potential support and incentives.”

Despite near-term pressure, Colliers believes the long-term outlook remains positive: “Global trade will return to equilibrium and continue to fuel Singapore’s industrial market.”