Industrial rents and prices post 12th consecutive quarter of growth in 3Q2023

Statistics released by JTC on Oct 26 show that industrial rents and prices have been resilient despite a decline in manufacturing output and GDP in 3Q2023. Both indicators registered a 2% and 1.4% quarter-on-quarter growth respectively, marking the 12th consecutive quarter of growth since 4Q2020.

On a year-on-year basis, industrial rents and price increased 9.3% and 6.2% respectively. For the first nine months of the year, industrial prices and rents rose 4.4% and 7.1% respectively.

Despite the growth, a trend of weaker demand appears to be emerging, as industrial occupancy rates registered a slight fall of 0.2 percentage points to 88.9%. The outstripping of new supply by total occupied stock stood at 0.8 million sqm (roughly 8.6 million sq ft).

Rents for the logistics and warehouse segment, multiple-user factories, single-user factories, and business parks grew 2.4%, 2%, 1.9% and 1.2% quarter-on-quarter respectively.

The slower price growth for multiple-user factories came in tandem with a fall in multiple-user factory tenancies from 2,522 in 2Q2023 to 2,461 in 3Q2023, as well as high interest rates. Prices of the segment rose 1.1% quarter-on-quarter – its slowest quarterly growth in eight quarters, and prices of single-user factories rose 1.7%.

Tricia Song, head of research for Singapore and Southeast Asia at CBRE, highlighted that industrial prices continue to inch upwards at a slower pace than rents in 3Q2023, and yields remain relatively attractive.

With an uncertain economic backdrop and increased supply coming in 2024, as well as higher rent base, Song predicts future rental growth to slow, in particular for segments that are seeing higher supply.

Leonard Tay from Knight Frank Singapore had a more optimistic view, noting that business sentiment for the manufacturing sector remained positive. He also added that the manufacturing sector grew 0.2% quarter-on-quarter in 3Q2023, rebounding from its 1.5% decline the previous quarter.

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JLL’s Tan Boon Leong believes industrial rents may post full-year gains of around 8% to 9%, while industrial price growth could moderate from 7.5% in 2022 to around 5% to 6% in 2023.

While there are early signs of bottoming out in manufacturing and exports, companies are unlikely to expand until there is more clarity on the economy. Despite this, indicators suggest that a recovery might soon be on the horizon, as the outlook by the end of 2023 will be more hopeful for the manufacturing sector than at the start of the year.

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