There's only one bright spot in Singapore's industrial sector

6 out of 9 industrial REITs registered lower occupancy rates in 2Q.

Similar to previous quarter’s trend, industrial sector remains amongst the main drags for Singapore REITS during the 2QCY16 earnings period.

According to OCBC Investment Research, of the nine industrial REITs which it tracks, six registered lower occupancy rates as at end 2QCY16, versus a quarter ago.

Rental reversion figures were also subdued for those which gave disclosures, ranging from -15.8% (Cambridge Industrial Trust) to 4.1% (Ascendas REIT’s Singapore portfolio).

According to JTC, the price and rental indices of all industrial properties dipped 2.3% and 1.7% QoQ, respectively, in 2Q16. This was the fifth consecutive quarter of decline for both indices.

The business park segment was the only bright spot which saw positive rental growth during the quarter.

"We believe the outlook ahead remains challenging, given expectations of continued softness in the global economy and manufacturing sector, coupled with looming oversupply concerns," said OCBC.

On 11 Aug, The Ministry of Trade and Industry narrowed Singapore’s GDP growth forecast to 1%-2%, from 1%-3% previously. Meanwhile, an estimated 1.6m and 2.0m sq m of industrial space is expected to come into the Singapore market in 2H16 and 2017, respectively.

OCBC noted that these figures appear ominous when taken in comparison with the average annual supply of 1.8m sq m and average annual demand of 1.2m sq m in the past three years.