COTD: Industrial lease renewals rise in Q3 as cost concerns limit relocations

The average islandwide logistics/warehouse rent held steady with expected growth in 2025.

New industrial leases remained low in Q3 2024 as most occupiers preferred to renew leases in their existing premises rather than relocate or expand due to cost considerations, JLL reported.

New supply dropped to 6% from 11% in 2023, whilst net absorption fell to 4% from nearly 7% a year ago. Meanwhile, the vacancy rate decreased to 9% YTD 2024, the lowest since 2019.

In addition, new requirements for ambient and cold logistics/warehouse space have pushed some tenants facing land lease expiries to relocate.

The average islandwide logistics/warehouse rent for the period also held steady and investors remained keen on acquiring logistics/warehouse assets.

For example, ESR LOGOS REIT bought a 51% interest in the holding entity of 20 TSA, comprising a manufacturing facility and ramp-up logistics/warehouse.

JLL expects the availability of more space options and occupier cost sensitivity should keep rents stable for the next six months, whilst rent growth could resume when demand picks up alongside stronger economic and manufacturing sector growth in 2025.

JLL also sees yields compress by 2025 on the back of investors' sustained interest in logistics/warehouse assets and lower borrowing costs.