Industrial leasing falls 4.6% despite factory growth

Occupier demand to remain concentrated in modern, well-connected and higher-quality properties.

Singapore’s industrial leasing volume declined 4.6% year on year in the second quarter despite stronger manufacturing output, according to Savills.

Manufacturing expanded 12.5% during the quarter, accelerating from 7.3% in Q1, supported by AI-related demand for semiconductors and semiconductor manufacturing equipment.

However, economic uncertainty and cautious business sentiment led occupiers to moderate their expansion plans. Demand weakened across most industrial asset classes, particularly single-user factories and warehouses.

Rental performance varied by property type and quality. Prime warehouse and logistics rents increased 2.3% QoQ, supported by demand for modern and well-connected facilities.

In contrast, prime multiple-user factory rents fell 1.4% to a two-year low. Standard business park rents declined 0.8%, whilst prime business park rents slipped 0.2%.

High-specification industrial rents rose 0.6% after three consecutive quarters of decline.

Savills executive director Ashley Swan said cost-conscious occupiers were increasingly selecting properties based on efficiency, connectivity and specifications. She expects the performance gap between newer and older industrial properties to persist.

In the sales market, strata industrial transactions increased 19.7% QoQ to 437 deals, reversing two consecutive quarters of decline. Buyers, however, remained selective and focused on well-located properties with longer remaining leases.

Freehold industrial property values rose 1.6%, whilst prices of 60-year leasehold properties edged up 0.3%. Values of 30-year leasehold assets declined 1.9%.

Savills expects multiple-user factory rents to remain flat in 2026. Warehouse and logistics rents are forecast to grow by approximately 1%, supported by demand for modern logistics facilities but constrained by cautious occupier expansion.

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