Industrial rents in Singapore continue to rise in Q4 2022
According to Alan Cheong, Executive Head of Research & Consultancy at Savills, Singapore's industrial property market saw a decline in leasing volume in the fourth quarter of 2022 due to several factors, including a confluence of fuel leases due for renewal and a conservative approach to taking up more space amidst a slowing economy. The tech sector was hit particularly hard, with funding drying up and layoffs leading to an increase in vacancy rates for business park spaces.
Despite these challenges, rental rates continued to rise in the fourth quarter of 2022, including for business park spaces, which experienced a rise in vacancies. Cheong expects this trend to continue into 2023, driven by inflation, the need for businesses to build a buffer against potential supply chain disruptions, and landlords passing on operating costs to tenants.
In terms of sales, the focus has been on shorter-term leases with 30 years or less of industrial lease land lease life left. The value of a property is directly proportional or inversely proportionate to the length of the lease, with shorter leases resulting in lower property values. While prices are expected to trend upwards in 2023, they may not be as aggressive as in previous years.
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