Industrial property rents continue to rise but prices soften in 1Q24

Tan Boon Leong, Executive Director, Logistics & Industrial, Singapore 陈文龙， 执行董事，产业与物流 (新加坡) commented:

JTC’s statistics released today showed the all-industrial property rent index rose for the 14^th consecutive quarter in 1Q24, and at the same pace as the 1.7% q-o-q increase in 4Q23. This was despite a rise in vacancy and fewer tenancies in 1Q24.

Specifically, JTC’s data showed the islandwide industrial vacancy rate climbed to a 23-quarter high of 11.3% in 1Q24 mainly due to the near doubling in net space additions from 65,000 sqm in 4Q23 to 127,000 sqm in 1Q24, while the number of industrial tenancies fell to a 15-quarter low of 2,948 during the quarter.

1Q24’s rent growth is thus likely driven by the higher rents sought by landlords for better performing quality premises. For example, JLL Research’s showed that landlords persistently pushed for higher rents amidst a supply crunch in the logistics/warehouse segment during the quarter.

Conversely, JTC’s all-industrial property price index (based on single- and multi-user factories) softened by 0.2% q-o-q in 1Q24, ending 13^th consecutive quarters of uptrend. This was dragged down by the 1.0% q-o-q correction in single-user factory prices. Although prices of multi-user factories rose for the 14^th consecutive quarter, the pace of growth has slowed q-o-q.

Barring any unforeseen external shocks, we maintain the stance that the recovering manufacturing sector will support demand for factory space, while persistent global supply chain disruption risks should underpin demand for warehouse space.

However, the sluggish economic activity in 2023 is starting to translate into slower demand for industrial space. Coupled with the higher estimated supply pipeline of about 1.4-1.6 million sqm (net floor area) in 2024, compared to the net space addition of 0.9 million sqm in 2023, we expect overall industrial rents to rise at a slower pace in 2024.

While prices have corrected slightly in 1Q24, there is still potential for full-year 2024 industrial price growth as buying demand for industrial property assets is expected to stay elevated for their positive yield spreads over interest rates. However, alongside the anticipated moderation in rent growth, overall industrial price growth is also expected to slow down in 2024.