Singapore warehouse and logistics rents to increase by up to 3% this year

And rents for multiple-user factory space are expected to grow by up to 2.2%.

Owing to a slew of global uncertainties, Savills says the Singapore manufacturing sector is expected to be negatively affected. Geopolitical tensions and the timing and scale of interest rate cuts by the Federal Reserve are key variables in today’s market. 

“Coupled with other challenges such as inflationary pressures, a slowdown in external growth, de-globalisation and spillovers from weaker growth in China, the industrial market is likely to continue seeing slowing growth momentum this year,” the analyst said.

Here’s more from Savills:

However, because the supply pipeline for multiple-user factories is low this year, rents for this segment may still rise. Also, as units in such factories are generally smaller, they are sought after by tenants who wish to keep their overheads low. As for prime warehouse and logistics space, given that most occupiers remain cost-conscious, rental growth for the rest of the year, though positive is likely to lose some momentum. Landlords may have to further lower their rental expectations when the bulk of prime warehouse space is completed next year. 

With nearly 3.2 million sq ft NLA of new business park space (Punggol Digital District and Geneo) expected to complete by the end of next year, overall business park vacancy is likely to remain under pressure before the newly completed space can be absorbed. 

Based on the pre-commitment rate of 65% across Punggol Digital District which will complete in two phases by 2025, the overall business park vacancy rate is projected to hit over 22% this year when five out of the eight towers complete in phase 1 from September 2024. Older properties will continue to face occupational challenges as tenants with budgets may be drawn to newer Business Parks while those who face rental constraints may settle for pure no frills or high-spec industrial space. 

Arising from the completions in the newer digital districts, the problems for the older and even the latest business parks become compounded. This could in turn apply further pressure to business park rents, especially for the older developments. We are revising our rental forecast for multiple-user factory space from 0% to 0% to 2.2% for 2024. For the warehouse and logistics space, we maintain our 0% to 3% increase for the year.