EDMUND TIE’s comments: JTC’s announcement on 2Q 2022 industrial property statistics
  • Latest news
  • 28 July 2022

EDMUND TIE’s comments: JTC’s announcement on 2Q 2022 industrial property statistics

SINGAPORE, 28 July 2022 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on JTC’s 2Q 2022 industrial property statistics.

The industrial sector continued to post strong growth momentum in 2Q 2022, as evident from the five-fold increase in net absorption to 399K sq m in 2Q 2022 from 71K sq m in the previous quarter. In part, the pickup in absorption was led by the completion of 322K sq m of space, with the largest project completed in 2Q 2022 being the JTC-developed multiple-user factory, TimMac @ Kranji, which has obtained partial TOP with 138K sq m GFA coming onstream.

In 2Q 2022, both industrial prices and rents continued with their upward trajectories, rising by 1.5% qoq and marking their seventh consecutive quarter of increase. All sub segments (single-user factory, multiple-user factory, business park and warehouse space) posted rental increases. In particular, the multiple-user factory and warehouse segments outperformed, posting the highest rental increases of 2.1% qoq across all sub segments and recording a fairly sharp pick-up in occupancies of 0.6% pts as demand outpaced supply during the quarter. In particular, the warehouse segment saw a buoyant recovery in demand to 205K sq m in 2Q 2022 from a 39K sq m contraction in the earlier quarter, driven by protracted supply chain disruptions and the relentless growth of e-commerce.

The commendable export performance for 1H 2022 as well as a resilient manufacturing sector, which has recorded two years of monthly expansions, continued to buoy leasing demand for factory space. The transport engineering cluster helped support manufacturing output growth, particularly in the aerospace segment which gained momentum for maintenance, repair and overhaul (MRO) activities as air travel picks up. The food, beverage & tobacco segment was also a significant driver of demand; output rose by 14.2% yoy in 1H 2022 compared with a 4.7% contraction in 2021. This was likely attributed to the continued popularity of food delivery platforms which bolstered demand for shared and cloud kitchen spaces.

Looking ahead, the multiple economic headwinds (rising interest rates, weakening sentiment, geopolitical uncertainties, high energy prices, Covid disruptions in China and fresh pandemic waves) have undoubtedly led to a softer global outlook which would put a dent in the growth of the manufacturing sector. However, there are two ameliorating factors. One, we expect the manpower crunch in the industrial sectors to be gradually alleviated as border easing continues. Two, the recent continued investment commitments by global heavyweights such as WuXi Biologics, WuXi AppTec and Sinovac Biotech in the pharmaceutical space, attest to Singapore’s status as an attractive regional hub for high-value manufacturing and R&D innovation amid economic uncertainties and competition. We do expect significant multiplier effects relating to job creations and business opportunities for supporting industries along the value chain.

For the remaining of 2022 and 2023, we expect about 1.95 million sq m of industrial space to come onstream, rivalling 2014’s 1.96 million sq m record completion. While the headline supply pipeline may appear daunting, in the near to mid-term, with the greatest supply pressure is loaded in the single-user factory segment. However, this is less of an issue given that the supply is developed for own use application by industrialists.

For the multiple-user factory space and business park segments, we see balanced demand-supply dynamics with the immediate pipeline amounting to 1.5 years of prevailing annual absorption. The pressure is somewhat more prevalent in the warehouse space (at 3.0 years of annual absorption), and this could cap the growth of warehouse rents. However, the pandemic and the current climate have accentuated the importance of supply chain resilience, as industrialists embark on various strategies to manage inventories and mitigate risks, including investments in analytics, technology and sustainability solutions. Investments in superior logistics technology will continue to bolster demand for modern warehouse and logistics spaces, even as businesses cater to the increasing demands of consumers for shipping.

For 2022, we maintain our rental growth forecasts of 7-8% for modern warehouse and quality factory spaces. With a limited supply pipeline, rents of business parks located in the central region are anticipated to rise by up to 4.0% this year, given the full back-to-office workforce and the office market recovery.


END

For further information, please contact:

Seah Li Ching (Ms)

Corporate Communications

DID: +65 6393 2369

Email: liching.seah@etcsea.com

Back
to Top