Multi-user factory segment drives growth in industrial REITs

The segment is expected to see the strongest rental growth of 18%.

Industrial properties have reported strong occupancy rates and a positive trend in rental growth, with the multi-user factory segment showing the most improvement in occupancy, rising by 1.1 percentage points to 91.6%, according to the DBS report.

This translates to a net absorption of around 126,000 sq m.

Moreover, multi-user factories are anticipated to see the strongest rental growth of 18%, whilst warehouses are expected to follow closely with an increase of 17%.

Based on the report’s estimates, rental reversions in FY 2026 to FY 2027 are expected to remain healthy, with lease renewals commanding rents approximately 6% to 7% higher.

With limited new supply projected over the next three years, averaging around 211,000 sqm annually, the report noted that the segment is well positioned for continued stability.

This limited supply compares favourably with the five-year average demand of around 3,14,000 sq m, suggesting that incoming inventory should be quickly absorbed.

This resilience is further supported by the redevelopment of older multi-user factories, which is shifting existing tenants to newer, higher-specification properties with better accessibility.

Consequently, demand for modern facilities in this segment is expected to remain strong, with the segment being led by newer properties that meet evolving industrial needs.

Additionally, the warehouse segment has also shown notable rental growth, with the rental index climbing 3.5% year-to-date (YTD), following a 9.7% increase reported in FY 2023 due to sustained demand for warehousing space driven by e-commerce and supply chain requirements.

Top picks in the industrial REIT space are Mapletree Industrial Trust (MINT), Mapletree Logistics Trust (MLT), and CapitaLand India Trust (CLINT), as well as REITs with significant exposure to data centres (DCs) in key growth markets across Asia.

MINT and MLT have demonstrated resilience in managing financial costs, with most downside risks already accounted for, according to DBS’s report.

With their sponsors' robust pipelines and a strong track record in third-party transactions, MINT, MLT, as well as CapitaLand India Trust (CLINT), are well-positioned to capitalise on accretive acquisition opportunities.

Currently trading at or near book value, the report noted that both MINT and MLT are well-positioned for equity fundraising, allowing them to finance growth initiatives efficiently.