SINGAPORE, 27 January 2022
RENTS & PRICES
Overall industrial rents inched upwards by 0.2% qoq in 4Q 2021 while overall industrial prices rose by 1.4% qoq, in line with the broad recovery of the sector and bearing testament to the sector’s resilience during the Covid-19 pandemic. The overall manufacturing sector has now recorded its 18th month of expansion and the starlet of the quarter was the single-user factory segment which saw rents and prices registering the greatest improvement of 0.7% qoq and 1.5% qoq respectively, as compared to other industrial segments. The pronounced interest for single-user factory spaces coincides with some slowdown the manufacturing growth across the region towards the end of last year, and smaller industrialists have likely taken a backseat in activity, resulting in the market pivoting towards larger single-user factory spaces. Warehouse rents also increased by 0.4% qoq, as changing consumer habits towards online shopping and, food and grocery deliveries support the growth of e-commerce activities.
OCCUPANCY
The occupancy rate for multi-user factory increased 0.4% pt qoq to 90.2% in Q4 2021 as manufacturing activity continued while that of business park also improved by 0.2% pt qoq to 84.5% in line with the improvement in demand for quality office spaces. Overall industrial leasing demand weakened in 4Q 2021 as absorption fell significantly to 18K sqm from 220K sqm in the previous, although this was a reflection of the low supply completions of just 11K sqm during the quarter rather than an outright softening of demand. The bulk of the leasing demand was driven by the warehouse segment which took up 36K sqm of space. During the quarter, a new specifically-designed integrated e-commerce facility Logos Ehub at 4 Pandan Crescent was partially completed with about 38K sqm GFA coming onstream.
TRENDS
We expect an unabated shift towards advanced manufacturing. Besides the announced investments from companies like BioNTech, Global Foundries in recent months, technological firms like Delta Electronics (building automation) and Boston Dynamics (robotics) have confirmed their plans to set up a base in Punggol Digital District. The advancement of 5G networks will help spur innovation and position Singapore as a leading digital economy, accelerating the nation’s Industry 4.0 transformation in the process. High-specs industrial assets will likely receive greater investor interest, and landlords are now looking more seriously into retrofitting or redeveloping their assets to higher specifications. In addition, with occupiers’ increasing demand for green and sustainable spaces in line with their ESG efforts, more industrial assets are anticipated to be equipped with energy-efficient and clean technologies. Industrial spaces have also been transforming from traditional pure-use factory/warehouse units to modern efficient and flexible spaces, complemented with ancillary retail and F&B spaces and other fitness, medical and childcare amenities; newer spaces in the future are likely to offer such compelling propositions to appeal to occupiers and their workforce.
OUTLOOK
Despite improving demand prospects, the sizeable supply pipeline in 2022 will likely cap the upside of rental growth. Despite increasing global Covid-19 vaccination rates and booster vaccination roll-out as well as the gradual reopening of borders, global growth is expected to soften for 2022 amid concerns over spread of Omicron variant, continued global supply chain bottlenecks and looming inflation costs. Furthermore, China’s slowing growth and regulatory clampdown as well as the expected double whammy of Singapore’s fiscal and monetary policy tightening would lead to industrialists and investors adopting a cautious approach towards rapid expansion. However, sustained prospects for the manufacturing and logistics sector are expected to underpin rental improvements for factory and warehouse spaces this year. We expect rents of industrial space to grow between 2-3% for multiple-user factory space in 2022, while hi-tech factory and warehouse spaces will likely see higher rental growth upside of 3-5%.
ENDS
For further information, please contact:
Chan Yee Yin (Ms)
Head, Corporate Communications
O: + 65 6393 2369
Email: Yeeyin.chan@etcsea.com
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