Singapore industrial completions to stay scarce for the rest of the year

Rents are expected to continue growing.

According to a JLL report, new industrial completions for lease are foreseen to stay scarce in 2024. As such, demand backlog should keep rents on the growth trajectory in 2024. 

“Landlords are also observed to be seeking higher rents by marketing spaces with upcoming lease expiries from June 2024 onwards, subject to non-renewal or pre-termination by the existing tenants,” the report added.

Here’s more from JLL:

However, the easing level of new enquiries on the back of 2023’s sluggish economic activity could potentially moderate the upward pressure on rents. In the capital market, sustained investors’ interest, coupled with the impending US Fed interest rate cuts, could keep yields steady but the prospects of weakening rent growth could moderate capital value growth.

New enquiry volume moderates

New enquiries for storage space eased in 1Q24 as the weakened demand for goods and services, resulting from sluggish economic activity in 2023, began to manifest as a reduced need for storage.

Despite this, amid limited space options, available pockets of space arising from non-renewals or pre-termination were observed to be quickly taken up by occupiers with immediate space needs. Based on our understanding, new tenants were secured during the quarter for at least 110,000 sq ft of non-renewal or pre-terminated warehouse space in the West that were listed by landlords in late-2023.

Limited quality spaces for lease despite new completions

Major warehouses completed in 1Q24 include the facility at 4 Benoi Crescent and the second phase of LOGOS eHub. However, the availability of quality space to meet immediate space needs remains limited. We understand that the facility at 4 Benoi Crescent is fully committed with POKKA as the anchor tenant, while LOGOS eHub primarily caters to e-commerce players.

Meanwhile, landlords continued to explore enhancement opportunities for their aging assets. During the quarter, ESR-LOGOS REIT unveiled plans to redevelop its existing Cold Centre at 2 Fishery Port Road into a brand new ramp-up cold storage facility, with construction targeted to commence towards the end of 2024.

Supply crunch continues to drive rent and capital value growth

Rent growth stretched into the 12th consecutive quarter as landlords persistently pushed for higher rents amidst a supply crunch. The positive yield spread over borrowing costs kept investors drawn to the asset class, contributing to steady yields and supporting another quarter of capital value growth.

There were two major logistics/warehouse transactions (worth at least SGD 5 million) in 1Q24. Mapletree Logistics Trust divested its cargo-lift warehouse at 73 Tuas South Avenue 1 for SGD 16.80 million, while the warehouse at 7 Toh Tuck Link was sold for SGD 25.00 million.

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