The lacklustre manufacturing sector and ample supply of space sent industrial property prices and rents down in the second quarter - a trend experts tip to persist.
Prices slipped 0.7 per cent from the first quarter, according to JTC data on Thursday, and are down 0.9 per cent from a year earlier.
Rents tell a similar story - down 0.7 per cent in the second quarter, led by the multiple-user factory segment, and off 2.7 per cent on 2014.
Industrial property prices and rents tend to track the Purchasing Managers' Index, which showed factory activity contracted for five straight months before expanding in May and June, noted Mr Lim Kien Kim, executive director and head of industrial at Knight Frank.
But with the global economic recovery expected to be patchy, "we are finding it hard to determine what is going to drive demand", said Mr Lim. "At the same time, we have excess stock."
About 2.54 million sq ft of factory space was completed in the three months to June 30, but new absorption has fallen from about 5.5 million sq ft in the fourth quarter of last year to 2.3 million sq ft for the second quarter, said Mr Nicholas Mak, executive director of research and consultancy at SLP International.
The vacancy rate across all industrial property was 9 per cent in the second quarter, down from 9.3 per cent in the first. But vacancy rates for factory space rose 0.1 percentage point to 9.2 per cent.
"This level is relatively quite high, considering the vacancy rate was less than 9 per cent in the seven-year period from the third quarter of 2007 to the second quarter of last year," said Mr Mak.
About 17.2 million sq ft of industrial space is expected to come onstream in this half of this year, and a further 30.1 million sq ft next year, JTC said on Thursday.
"This is significantly higher than the average annual supply and demand of about 16.1 million sq ft and 11.8 million sq ft in the past three years, and is likely to exert further downward pressure on occupancy rates," it said.
This bodes well for industrialists as occupancy costs should be more affordable, said Mr Desmond Sim, CBRE head of research for Singapore and South-east Asia.
Most industrial Reits have signed long leases and are not likely to be too affected for larger parts of their portfolio, he said.
"But there will definitely be some pressure where they have multi-tenanted properties with leases up for renewal, given the strong supply coming in."