Singapore industrial rental index hits highest annual growth in 11 years

The index grew by 8.9% in 2023.

According to a Colliers report, the Singapore JTC All Industrial rental index continued its thirteenth consecutive quarter of growth in Q4 2023, rising by 1.7%, slowing down slightly from the 2.0% q-o-q growth in the previous quarter. This means an overall growth of 8.9% in 2023, accelerating from the 6.9% registered in 2022 and the highest annual growth recorded since 2012.

The price index rose by 0.6% q-o-q, also a slight slowdown from the 1.4% q-o-q growth in Q3 2023 to come in at 5.1% for 2023. This marks a moderation from the 8.5% registered in 2022. Rental and price growth are both expected to moderate in light of slowing global growth and weakness in exports.

Here’s more from Colliers:

Singapore industrial price and rents see slower but steady growth

Rental growth was positive across all segments, despite declining occupancy in the single-user factory and business park segments. Multi-user factory rents was the outperformer at 2.3% q-o-q, while Business Park rents experienced marginal growth at 0.3% q-o-q. For 2023, rents for multiple-user factory spaces saw the highest growth amongst all segments at 10.7%, the highest annual growth recorded since 2011.

Robust supply pipeline may lead to a slowdown in rent and price growth

There will continue to be a ramp-up of supply in the next few years: between 2024 to 2026, there is an average annual supply of 1.1 mil sqm coming onstream, far exceeding the average annual demand of 0.7 mil sqm per year over the past three years.

Against the backdrop of slower global growth under elevated capital costs, Colliers is projecting the overall industrial rent growth for 2024 to moderate to between 3 to 5% and price growth to between 2 to 4%. Rental growth will likely be led by the warehouse segment at 4 to 6%. Business parks and factories are expected to see muted rental growth at 0 to 2% due to the increase in supply and weakening demand.

Mr Lynus Pook, Head of Industrial Services, Singapore  commented: "The higher cost environment has increased the need for operational efficiency and cost management, and this is likely to increase the preference for high quality, modern industrial assets”

Warehouse and external investments to support the overall industrial sector

Industrial performance would be fragmented in 2024, as the higher supply could lead to higher vacancies and stagnating rents. On the other hand, shipping disruptions due to escalating geopolitical issues could bring tailwinds for warehouse space demand. In addition, there has been continuous investment from MNCs into Singapore as a regional logistics and advanced manufacturing hub, helping to support the overall industrial sector.

Ms Catherine He, Head of Research, Singapore added: “On the investment front, there is likely to be more sale and leaseback transactions or portfolio sales to free up balance sheets and in the search for higher returns. There are also likely to be more redevelopments and refurbishments of older assets in light of the preference for high quality modern industrial facilities.”