Industrial Market Loses Some Momentum 2Q2024 Savills
According to the August report compiled by Savills Singapore, the industrial market showed mixed performance in the second quarter of 2024. Industrial leasing experienced a decline in terms of demand for most segments, resulting in a 5.3% decrease in leasing volume. Multiple-user factory spaces managed to maintain a relatively flat leasing volume, while warehouses saw a slight increase. However, single-use factory spaces were hit the hardest, with a significant 27.3% decline in leasing volume compared to the same period in the previous year.
On the other hand, all segments of the industrial market observed a decline in vacancy rates in 2Q2024, a reversal from the trend in previous quarters. Warehouse vacancy rates decreased by 0.2 percentage points (ppt) quarter-on-quarter (q-o-q) to 8.7%, while the vacancy rates for both multiple-use factories and single-use factories eased by 0.8 ppt q-o-q to 8.7% and 0.2 ppt q-o-q to 12%, respectively. The vacancy rate for business parks also improved, with a q-o-q decrease of 0.3 ppt to 21.7% in 2Q2024, the first decline in the past six quarters. This was mainly driven by the better occupancy rates in the one-north area, although older developments in the outskirts continued to face pressure.
Meanwhile, industrial rents continued to rise, but at a slower pace in some segments. The average rental for a basket of industrial properties tracked by Savills increased by 1.1% q-o-q to $2.26 per square foot per month (psf pm) for multiple-user factories in 2Q2024. For warehouses and logistics properties, average rental growth was at 0.6% q-o-q to $1.68 psf pm, while the average rental for business parks inched up by 0.1% q-o-q to $4.07 psf pm, supported by the strong performance of newer clusters. High-spec industrial spaces also remained attractive, with an average rental increase of 0.6% q-o-q to $3.96 psf pm in 2Q2024 for Savills’ high-spec industrial basket.
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In terms of sales, there was a rebound in strata industrial sales activity in 2Q2024, with transactions surging by 42.9% q-o-q to 513 deals, the highest level in almost two years. This was mainly driven by City Developments’ bulk sale of 44 units at Cititech Industrial Building on Aljunied Road and the sales at Food Ascent, a food factory located in the same area.
However, despite the increase in transaction volume, there was a slower price appreciation for all tenure types in 2Q2024, based on the industrial properties tracked by Savills. For freehold properties, prices inched up by 0.5% q-o-q to $830 psf, while 60-year leasehold properties rose by 0.7% q-o-q to $516 psf. Properties with a 30-year leasehold tenure saw the smallest price growth of 0.1% q-o-q to $325 psf.
Looking ahead, Alan Cheong, executive director of research and consultancy at Savills Singapore, predicts that there may be some growth in multiple-user factory rents for the remainder of the year, given the low supply pipeline. He has revised his forecast for rental growth for multiple-user factories for the whole year, from 0% to between 0% and 2.2%. For warehouse and logistics space, he maintains his forecast of 0% to 3% growth for the full year.