Prices, rentals of Singapore industrial space continue to moderate in Q3

SINGAPORE - Prices and rentals of industrial space continued to moderate in tandem with occupancy rates in the third quarter, following the increase in supply of industrial land and space by the Government in recent years.

Tender prices for industrial government land sale sites targeting multiple-user developments have also declined, JTC said in its quarterly report on Oct 23.

The industrial space and multiple-user rental indices fell by 1.8 per cent and 2.2 per cent respectively in the third quarter on a quarter-on-quarter basis.

Year on year, the rental indices for industrial space and multiple-user factory space declined by 1.3 per cent and 2.3 per cent respectively.

This is the first year-on-year drop in rentals since early 2010, in contrast to the average increase of around 8 per cent a year over the past four years, said JTC.

At the same time, prices of industrial space also continued to stabilise, with the industrial space and multiple-user factory space price indices falling by 0.9 per cent and 1.8 per cent respectively on a quarter-on-quarter basis.

These falls reverse their respective gains of 0.7 per cent and 2.5 per cent in the previous quarter.

Year on year, the industrial space and multiple-user factory space price indices rose by 0.2 per cent and 3.4 per cent respectively, significantly slower than their average increases of around 16 per cent per year over the past four years.

After a 0.9 percentage point decline in the second quarter, occupancy rate of the overall industrial property market edged up by 0.2 percentage point quarter-on-quarter to 90.9 per cent in the third quarter.

This was on the back of a 1 per cent rise in demand, outstripping a 0.8 per cent increase in supply.

The increased occupancy rate was driven by the warehouse segment, mainly due to the take up of a few new single-user warehouses.

For multiple-user factory space, the occupancy rate fell by 0.5 percentage point to 86.8 per cent, the lowest level since late 2007, as a 1.5 per cent increase in supply outstripped the 1 per cent increase in demand.

On a year-on-year basis, the occupancy rate of the overall industrial property market fell by 1.8 percentage points to 90.9 per cent.

For multiple-user factory space, the occupancy rate fell by 3.3 percentage points to 86.8 per cent.

Looking ahead, about 1.2 million square metres (sqm) of industrial space, which includes 167,000 sqm of multiple-user factory space, is estimated to come on-stream in the fourth quarter, bringing the supply of industrial space for the full year to 3.1 million sqm.

A further 2.6 million sqm and 1.9 million sqm of industrial space is estimated to come on-stream in 2015 and 2016 respectively.

This is significantly higher than the average annual supply and demand of around 1.4 million sqm and 900,000 sqm respectively in the past three years and is likely to exert further downward pressures on occupancy rates, JTC noted.

The Government will continue to monitor the industrial property market closely to ensure that the diverse needs of industrialists are met, it added.

"Appropriate measures will also be introduced where necessary to promote a stable and sustainable industrial property market.

"JTC will also continue to develop more specialised and innovative facilities with productivity-enabling features such as shared facilities and services, to support the growth of key industry clusters and catalyse new ones in the coming years."