Industrial supply crunch persists in Singapore despite new completions

The projects completed in Q1 were mainly single-user facilities meant for self-use.

In 1Q23, the major industrial projects completed in Singapore include 2PS1 (located at 2 Pioneer Sector 1), 12 Penjuru Lane and Soon Bee Huat Building at 32 Penjuru Lane, which according to JLL collectively added approximately 1.2 million sq ft of new logistics/warehouse space.

“As the bulk of the major new completions in 1Q23 involved single-user facilities intended predominantly for self-use, and with 2PS1 (a multi-tenanted development) understood to be fully committed, available space options for lease remained limited,” the analyst said.

Here’s more from JLL:

End-users and third-party logistics players continued to seek expansion spaces in 1Q23. This included unfulfilled demand from earlier quarters.

Tenants are also beginning to request to start their renewal negotiations earlier than the typical six to nine months prior to lease expiry.

Eighth consecutive quarterly rise in rents and capital values

While logistics/warehouse assets remain highly sought after by investors, deal materialisation was hampered by the lack of suitable trading stock. At the time of writing, there were two major deals comprising the sale-and-leaseback of Iron Mountain’s warehouse at 26 Chin Bee Drive for SGD 47.00 million, and the sale of a freehold warehouse at 94C Jalan Senang for SGD 5.20 million.

With demand surpassing supply in both the leasing and capital markets, this continued to drive the average islandwide logistics/warehouse rent and capital value upwards in 1Q23.

Outlook: Rents and capital values en-route to reaching new highs

The faster-than-expected rent growth in 1Q23 prompted us to upgrade our full-year 2023 rent forecast, as demand is expected to continue to outpace supply. However, we keep the view that overall rent growth could moderate from 2022, taking into consideration the elevated macroeconomic headwinds.

The upgraded rent growth outlook and positive yield spread over interest rates should keep logistics/warehouse assets on the radar of investors, and capital values on a rising trend.

Note: Singapore Logistics & Industrial refers to Singapore's islandwide logistics/warehouse market.

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