Collier's Analysis: Singapore Industrial Properties Outlook Still Positive

Collier’s Analysis: Singapore Industrial Properties Outlook Still Positive

October 30, 2023

Collier’s analysis of the JTC All Industrial Rental Index reveals rental growth was positive across all segments, despite declining occupancies.

Despite lukewarm industrial indicators, the JTC All Industrial rental index continued its twelfth consecutive quarter of growth in Q3 2023, rising by 2.0%, slowing down slightly from the 2.1% q-o-q growth in the previous quarter. However, NODX (Non-Oil Domestic Exports) and manufacturing output point to an improvement in September 2023, contracting at slower rates, while PMI improved for the fourth straight month to 50.1 in September, moving out of contractionary territory. Further, the 3Q2023 Business Expectations Survey showed that the general outlook and output forecast for the manufacturing sector remains positive for the second half of 2023.

Rental growth was positive across all segments, despite declining occupancy with the exception of Warehouses. Warehouse rents was the outperformer at 2.4% q-o-q, while Business Park rents experienced marginal growth at 1.2% q-o-q. The price index rose by 1.4% q-o-q, also a slight slowdown from the 1.5% q-o-q growth in Q2 2023. Rental and price growth are expected to continue to moderate in light of slowing global growth and further weakness in the manufacturing sector.


With resilient demand, warehouses registered a rental increase of 2.4% q-o-q and saw occupancy further tightening to 91.3% from 91.0% in the previous quarter. This also means warehouses registered the highest rental growth q-o-q across all segments and was the only segment seeing an increase in occupancy.

Supply continued to be tight this quarter (with some stock withdrawn from the market) and outweighed by demand. Further, warehouses represent only 25.7% of upcoming industrial space. Demand from international logistics players remained firm with AP Moller Maersk, DB Schenker and DSV(with Logos) breaking ground on their built-to-suit warehouses, while prime logistics facilities are almost fully occupied.

Nevertheless, with a tentative manufacturing recovery under weaker global growth and economic uncertainty, this rental growth is expected to moderate.


The rental indices for multiple-user/single-user factory have increased by 2.0%/1.9% q-o-q respectively. There is still take-up at multi-user factories from biomedical and tech-related firms, albeit at a slower pace. With a surfeit of single-user factory space coming on stream, and overall softer demand on the back of a tempered manufacturing outlook, leasing activity and rental growth for both types are likely to slow going forward.

            Business Parks:

Business Park rents have grown 1.2% q-o-q in Q3 2023, despite occupancy easing by 10 percentage points. In addition to higher upcoming supply, leasing activity is expected to be restrained by weaker macroeconomic conditions. Further, vacancies remain elevated, especially in the outlying business parks. With occupiers spoilt for choice, it is likely to become a tenants’ market where rents have to soften.


Overall occupancy declined by 0.2% q-o-q, (vs an increase of 0.3% q-o-q in 2Q 2023), as new completions came onto the market. There will be continue to be a ramp-up of supply in the next few years with construction catching up to demand: between 2024 to 2026, there is an average annual supply of 1.0 mil sqm coming onstream, exceeding the average annual demand of 0.7 mil sqm per year over the past three years.

With weaker demand relative to new supply, there is likely to be lower leasing interest and activity. Cognisant of the upcoming competition, landlords might have to give in to lower rents to retain or attract new tenants, especially at newer projects. As such, occupancy and rental growth is expected to continue to ease. There is also likely to be more divestments or refurbishments of older industrial assets as corporates look to free up capital, and as REITs look to rejuvenate their portfolios.

Nevertheless, the warehouse segment is expected to continue being the bright spot of the sector, with strong demand from last-mile logistics and cold storage. In addition, there continues to be investments into new facilities in Singapore, which will help support the overall industrial sector. New builds are expected to lead rental growth as they are more likely to be able to meet the business requirements of high-tech industries such as biomedical and advanced manufacturing. With the improvement in industrial indicators and business sentiments, industrial demand could just turn a corner early next year.

Ed.  Data courtesy of JTC Quarterly Market Report on Industrial Properties. Article photo by Brayden Prato on Unsplash.


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