Higher Supply And Weaker Demand Put Downward Pressure Industrial Property Rents Colliers
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According to a recent research report by Colliers, the industrial property market in Singapore is expected to see a moderation in both prices and rents this year. This is due to the combination of higher supply and weaker demand, as indicated by JTC’s 4Q2024 data.
Colliers projects that the overall annual industrial rental and price growth will be between 0% to 2% in 2025, in comparison to the 3.5% growth seen in both categories last year. This muted outlook is a result of the market “losing steam”, according to Colliers, with the JTC All Industrial rental index showing a 17th consecutive quarter of growth in 4Q2024, rising only 0.5% quarter-on-quarter (q-o-q) and bringing the total growth for the year to 3.5%. This marks a significant decline from the 8.9% rental growth seen in 2023. Similarly, the price index also grew 0.5% q-o-q in 4Q2024, a decrease from the 1.2% growth in the previous quarter. This reflects a slow growth rate of 2.1% for industrial property prices last year, which is less than half of the 5.1% increase seen the year before.
According to Colliers, the supply of industrial space is expected to increase significantly this year, with over 2.5 times the supply of last year coming onto the market, before tapering off from 2026 onwards. This oversupply has resulted in an imbalance between supply and demand, with certain segments of the market seeing slower precommittals for upcoming supply, or completed projects with lower occupancy rates. This increase in supply, coupled with cautious occupiers due to high interest rates and rising operating expenses, will continue to dampen rental growth.
Moreover, the current global climate of heightened trade protectionism has brought uncertainty into the market, potentially affecting business confidence and investment decisions. However, Colliers predicts that industrial demand will continue to be driven by the semiconductors, logistics, and advanced manufacturing sectors. As policies become clearer and market sentiments improve, there is also expected to be a gradual increase in industrial leasing activities, supported by the ongoing upturn in the chip cycle.
In the short term, due to the increase in supply and projected moderation in rents, this could be a beneficial year for tenants as they will have more options in the market. With newer industrial developments offering more modern specifications, there may be a trend of businesses relocating from older, ageing manufacturing spaces to newer projects, says Nicolas Menville, Executive Director and Head of Industrial Clients for Colliers Singapore. For those interested in industrial real estate, there are plenty of listings available on the market, with past rental and sale transactions to compare and analyze.
Overall, while the industrial property market may see a slowdown in prices and rents this year, there are still opportunities for growth in certain sectors such as semiconductors, logistics, and advanced manufacturing. As the market continues to adapt to the changing economic climate, it is important for investors and businesses to stay informed and make strategic decisions. With the help of a professional real estate agency such as Colliers, individuals can stay updated on the latest market trends and make informed decisions for their industrial property investments.