Singapore business park rents slip 0.9% in Q3

Savills expects rents of outlying business parks to bottom out soon.

A recent report by Cushman & Wakefield says rents of city fringe business park, prime logistics, warehouse and factory spaces in Singapore were stable in Q3 2021, thanks to tight vacancy rates. 

“Science Park rents ($4.27 psf/mth) registered a rise of 0.5% qoq, extending the growth in the previous quarter. Similarly, high-tech rents continued to increase by 0.3% qoq in Q3 2021. COVID-19 could have accelerated the digital adoption by manufacturers and industrialists. This coupled with the government’s push towards advanced manufacturing activities has supported demand for higher specification industrial developments.”

Here’s more from Cushman & Wakefield:

On the other hand, outlying business park rents ($3.54 psf/mth) fell by 0.9% qoq, weighed down by lower rents achieved by older developments. Nonetheless, the rates of rental decline have been moderate for the past two quarters of 2021 as compared to that in 2020, indicating that rents of outlying business parks are likely to bottom out soon amid relatively limited supply of new business park space.

Recovery is well underway 

Rental growth registered across different types of industrial properties in the first nine months of 2021 has reflected the expansion seen in the manufacturing sector – a key pillar of Singapore’s economy. The ongoing global chip shortage could lead to semiconductor manufacturers being more confident in committing capital to increase production volumes, increasing demand for factory space. 

Increased flow of biotechnology investments into Singapore as well as possible expansion from technology and logistics firms, which have been riding well on the exponential growth in e-commerce and business digitalization, could drive up demand for high-tech and prime logistics space. 

In Q3 2021, healthy demand amid moderate supply of prime logistics space has further tightened their vacancy rates, which are anticipated to remain low in the upcoming quarters. On the other hand, despite expected robust demand, occupancy rates of factory space could come under pressure in the latter part of 2021 and 2022 given the influx of new multi-user factory stock coming onstream after the year-long construction delays. 

Nevertheless, sustained uptrend in factory rents is expected, albeit tempered, underpinned by strong manufacturing output growth and progressive re-opening of the economy. Similarly, city fringe business park and warehouse rents are projected to continue rising. E-commerce needs together with vaccine and food storage requirements remain as key demand drivers for warehouse and prime logistics space in the near future