Singapore’s Industrial Real Estate: Mixed Signals in Q2 2024 as Vacancy Rates Improve Despite Softer Leasing Demand

A recent Savills Singapore analysis shows that Singapore’s industrial market had mixed second quarter of 2024 performance. While vacancy rates across many sectors improved, leasing volume fell in the market.

Leasing activity exhibited signs of slowing; total industrial tenancies dropped 5.3% year-on-year to 3,123 in 2Q2024. Particularly impacted were single-use manufacturing facilities, whose lease volume dropped significantly 27.3% year-on-year, lowest point since 2020. While warehouses witnessed a little rise, multiple-user manufacturing facilities kept rather steady lease volumes.

Though leasing activity slowed down, vacancy rates rose in every industrial sector in 2Q2024, therefore bucking the pattern of rises seen in past quarters. While multiple-use factories witnessed a more significant drop of 0.8 percentage point to 8.7%, warehouse vacancy rates dropped by 0.2 percentage points quarter-on-quarter. Vacancy dropped just 0.2% point to 12% for single-use factories. Driven mostly by better occupancies in the one-north area, business parks noted their first drop in vacancy rate in six quarters, falling 0.3 percentage points to 21.7%.

Although in certain areas they slowed down, industrial rents kept their increasing trend. Factory leases for multiple users climbed 1.1% quarter-on-quarter to $2.26 per square foot monthly. While business park rentals barely changed by 0.1% to $4.07 psf pm, warehouse and logistic properties saw average rental increase of 0.6% to $1.68 psf pm. Savills’ high-spec industrial basket showing an average rental increase of 0.6% to $3.96 psf pm kept High-spec industrial premises appealing.

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With transactions rising 42.9% quarter-on-quarter to 513 agreements, the highest transaction level in almost two years, the stratum industrial sales market exhibited indications of recovery in 2Q2024. Mostly, bulk sales at Cititech Industrial Building and Food Ascent accounted for this increase.

Price appreciation for industrial buildings slowed down in all tenure categories in 2Q2024. While 60-year leasehold homes grew by 0.7% to $516 psf, freehold properties witnessed a modest 0.5% increase to $830 psf. Properties with 30-year leasehold terms grew the least—0.1% to $325 psf.

ahead, Supported by a low supply pipeline, Alan Cheong, executive director of research and consultancy at Savills Singapore, expects possible increase in multiple-user factory leases for the rest of the year. For the whole year, he has changed his projection of rental growth for multiple-user manufacturers to run between 0% and 2.2%. For areas related to warehouses and logistics, Cheong keeps his full-year rental increase projection between 0% and 3%.

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