Factory, warehouse market in Singapore stuck under pressure

Leasing activity has tapered.

According to OCBC Investment Research, it is skeptical of the sustainability of the growth momentum in the factory and warehouse rental market.

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While several datapoints suggest a recovery in the manufacturing sector in Singapore (manufacturing output grew 8.0% in Oct; PMI showed continued expansion in Nov), leasing activity for factory space has tapered, according to property consultant CBRE.

Moreover, some factory buildings faced increased pressures to backfill significant spaces vacated by tenants due to relocation. From 2013-2016, we note that 43.66m sqft (13.0% of total factory space) of factory space is also expected to complete, which may potentially add burden to the already lackluster factory market. Hence, we believe that rents in the factory market may face downward pressures in the short term.