Why Singapore’s industrial sales market has been muted since early 2021

The mismatch in price expectations is driving sellers to keep the properties rather than sell them at a huge discount.

According to Savills, Singapore’s strata industrial market started to quieten down since early this year. Even though the total sales volume of 419 in Q2/2020 was significantly more than 149 deals transacted in Q2/2020, the pace of sales growth slowed down in 1H/2021. Notably, the number of sales caveats lodged for multiple-user factories declined from the peak in Q4/2020. 

“Many industrialists, particularly the Small and Medium-Sized Enterprises (SMEs), are looking to acquire multiple-user factory spaces at a favourable price. Although some sellers are now more realistic with their price expectations, most buyers expect greater price reduction amid pandemic-led disruptions. As a result of a mismatch in price expectations, sellers rather keep the property for stable revenue income than to dispose of it at a huge price discount,” said Savills.

Here’s more from Savills:

For the warehouse segment, sales volume had remained stable since Q3/2020, the quarter when the number of deals surged after the economy unlocked a notch. There is still strong buying interest from both end-users and investors who are looking for industrial assets including logistics warehouses and cold storage facilities. Coupled with limited supply available in the market, investors see warehouse logistics as one of the attractive asset classes, which have a strong potential in the long run and appeal to users from various industries. 

For the quarter in review, we observed that some end-users who operate their business in large warehouse facilities are looking for suitable warehouse properties in the outskirts as part of their decentralisation plan, instead of incurring high long-term rental costs. 

Industrial prices in Q2/2021 continued to increase on the back of healthy sales levels. From Savills’ basket of industrial properties4 , prices for freehold properties increased at a faster rate at 0.6% QoQ to S$705 per sq ft in Q2/2021. Savills’ basket of leasehold industrial properties showed that prices for 60-year leasehold properties continued trending up with a 0.5% QoQ uptick to S$434 per sq ft, while that for 30-year leasehold properties ended a six-quarter decline with a 0.1% QoQ growth to S$292 per sq ft.