Industrial leases leaped 14.6% to 10,473 in 2018

Occupancy rates edged up 0.4 ppt to 89.3% amidst an increase in monthly rents.

2018 saw industrial leasing records jump 14.6% YoY to 10,473 which is the highest annual volume since the start of the database in 2000 as full-year net new demand outpaced net new supply for the first time since 2011, according to Colliers International’s sector report.

This resulted in an improving occupancy rate by 0.4 percentage points (ppt) YoY to 89.3% in 2018, the report noted. Singapore’s industrial market leasing volume continued its upward trend from H1 2018 and totaled 5,280 in H2, as the market absorbed the abundant supply that entered in 2017 and 2018.

In terms of rents, business park monthly rents increased 2.9% YoY to $4.31 (US$3.16) psf in H2 2018 as tenants continued to favour newly completed and refurbished buildings with better specifications and good locations, Colliers explained, adding that upper floor monthly rents for independent high-spec industrial buildings located outside of science parks and business parks increased 2.1% YoY to $2.90 (US$2.12) psf.

Meanwhile, average gross monthly rents of warehouse-logistics properties edged down 0.8% YoY to $1.25 (US$0.92) psf. “Full-year 2018 net new supply of industrial space was relatively low at 5.8 million sqft, including 2.7 million sqft of warehouse space,” Colliers added.

Total net new supply in 2018 fell 72% YoY from the record of 20.9 million sqft of industrial space across all types completed in 2017.

“According to JTC, new supply in 2019 is set to increase to 16.2 million sqft, with 64% of that single-user factories, before easing from 2020 onwards,” Colliers said. The supply pipeline is reportedly mainly located in the West Region, whilst factory future stock is predominantly in the West, North and NorthEast regions. New supply of business parks are mainly in Punggol and Jurong.

“We expect the industrial rental recovery to be two-tiered with high-spec and business park space to fare better due to the higher demand, lower supply and also from the spillover effect from a strong office rent recovery in 2018 and further office rental upside in 2019. As more than 80% of the total upcoming supply is factory space, most of it conventional factories, rents in this segment would likely remain under pressure.”

With new logistics supply expected to slow in 2019 to around 2.1 million sqft, Colliers said it expects logistics rents to remain weak in H1 2019 before recovering 1-2% towards the end of 2019.