Massive warehouse supply glut threatens industrial landlords

Occupancy will feared to crash to 10-year low.

A huge supply of warehouse space is set to hit Singapore over the next three years, according to a report by CIMB.

CIMB said that the warehouse segment is the weakest link in the struggling industrial leasing sector, as an estimated 1.2 million square metres of new warehouse space is projected to be completed.

This represents 13.3% of existing stock, CIMB said.

The bulk or 76% of this additional capacity is scheduled to be completed in 2016-17.

“Based on a 10-year average annual absorption rate of 280,000sm, occupancy could fall from the present 91% to 88%, a level not seen since 2006, before stabilising. Hence, we expect warehouse rents to decline by up to 5% p.a. over the next two years,” said the report.