Singapore high-specs industrial vacancy rate hits 2-year high in Q1

The vacancy rate stood at 14.9% in Q1 2021, the highest since Q4 2018.

After registering positive net demand for the past two quarters, Savills reveals that net demand for business park and high-specs industrial spaces in Singapore fell back into negative territory of -75,300 sq ft in Q1/2021. This was largely led by a decline in take-up of 161,500 sq ft in the Central Region. 

As a result, the islandwide vacancy rate rose by 0.7 of a ppt from 14.2% in Q4/2020 to 14.9% in Q1/2021, the highest since vacancy rates reached the 15.1% registered in Q4/2018. The increase was mainly due to firms moving out of business parks. While occupancy rates of new business parks increased in the quarter, older parks continued to face greater challenges in attracting or retaining tenants. 

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Nevertheless, demand for business park space continued to emanate from technology and fi ntech firms which have thrived during the pandemic. However, for some fintech companies, they may still prefer to take up conventional office space which imparts a more professional image compared with business parks or high spec industrial space. 

Although the JTC rental index for business parks recorded a marginal QoQ increase of 0.1% for a second consecutive quarter, the average monthly rent in Savills basket of prime business park properties registered its first decline since Q2/2020 of -0.9% QoQ to S$5.76 per sq ft. Similarly, the average monthly rent of Savills basket of standard business park properties declined for a fourth consecutive quarter by a larger 1.2% QoQ to S$3.96 per sq ft as this type of space needs to provide greater flexibility in rental negotiations to maintain occupancy rates. 

As companies adopt cost-cutting measures amid uncertainties from how the pandemic will pan out, some of the demand for high-spec industrial space came from firms moving out of business parks to high-spec industrial units, which are less costly (for older buildings) but still able to provide a respectable corporate look. 

Nevertheless, as with business parks, the average monthly rent for Savills high-spec industrial basket declined by 0.5% QoQ to S$3.48 per sq ft in Q1/2021 after a QoQ increase of 0.9% in Q4/2020. With firms remaining budget conscious, older high-spec buildings may be better received by tenants. Demand for such space is expected to be stable in the long term, emanating from the technology, media and telecommunications and electronics sectors, which continue to perform well.