Industrial Market Loses Some Momentum 2Q2024 Savills
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In the second quarter of 2024, the industrial market experienced a mixed performance, according to a report from Savills Singapore in August. Leasing demand decreased in most segments, leading to a loss of momentum in industrial leasing volume. The total number of industrial tenancies recorded in the last quarter was 3,123 – a decline of 5.3% from the previous year.
The hardest hit segment was single-use factory spaces, with leasing volume dropping 27.3% year-on-year to 144 tenancies – the lowest it has been since 2020. Leasing volume for multiple-user factory spaces remained relatively steady, while warehouses saw a marginal increase.
On the other hand, all industrial segments experienced a decline in vacancy rates in the second quarter of 2024, after seeing an increase in previous quarters. The vacancy rate for warehouses decreased by 0.2 percentage points quarter-on-quarter to 8.7%, while the vacancy rate for multiple-use factories decreased by 0.8 percentage points quarter-on-quarter to 8.7%. Single-use factories recorded a 0.2 percentage point quarter-on-quarter drop in vacancy rates to 12%.
The vacancy rate for business parks also saw a decrease of 0.3 percentage points quarter-on-quarter to 21.7%, marking the first decline after six consecutive quarters of increase. Savills notes that the improvement in vacancy rates was driven by better occupancies in the one-north area, although older developments in the outskirts continue to face pressure.
Industrial rents continued to rise, although at a slower pace in certain segments. According to Savills, a basket of industrial properties saw a 1.1% quarter-on-quarter increase in multiple-user factory rents to $2.26 per square foot per month (psf pm) in the second quarter of 2024. Average rental growth for warehouse and logistics properties was 0.6% quarter-on-quarter to $1.68 psf pm, while average business park rents increased 0.1% quarter-on-quarter to $4.07 psf pm, supported by strong performance in newer clusters.
Savills notes that high-spec industrial spaces continue to be in demand, with the company’s high-spec industrial basket seeing an average rental growth of 0.6% quarter-on-quarter to $3.96 psf pm in the second quarter of 2024.
In the sales market, there was a rebound in strata industrial sales activity in the second quarter of 2024, with transactions increasing 42.9% quarter-on-quarter to reach 513 deals – the highest level in almost two years, according to Savills. This was primarily driven by the bulk sale of 44 units at the Cititech Industrial Building on Aljunied Road by City Developments. Sales at Food Ascent, a food factory at Aljunied Road, also contributed to the volume.
Prices for industrial properties tracked by Savills showed slower appreciation in the second quarter of 2024 across all tenure types. Freehold properties saw a 0.5% quarter-on-quarter increase in prices to $830 psf, while 60-year leasehold properties saw a 0.7% quarter-on-quarter increase to $516 psf. Properties with a 30-year leasehold tenure saw the smallest price growth of 0.1% quarter-on-quarter to $325 psf.
Looking ahead, Alan Cheong, executive director of research and consultancy at Savills Singapore, believes that multiple-user factory rents may see some growth for the remainder of the year, supported by a low supply pipeline. He has revised his full-year rental growth forecast for multiple-user factories from 0% to between 0% and 2.2%. For warehouse and logistics space, he maintains his full-year rental growth forecast of 0% to 3%. If you are interested in industrial properties, check out the latest listings on Industrial Real Estate.