Industrial Market Loses Some Momentum 2Q2024 Savills
The industrial market witnessed a mixed performance in the second quarter of 2024, according to research compiled by Savills Singapore in their August report. The leasing activity in the industrial sector slowed down across most segments, causing the overall leasing volume to decline by 5.3% year-on-year. Single-use factory spaces suffered the biggest hit, recording a 27.3% drop in leasing volume to a record low since 2020. In contrast, multiple-user factory spaces saw relatively flat leasing volume, while warehouses experienced a slight increase.
On the other hand, the vacancy rates for all industrial segments declined in the second quarter of 2024, reversing the trend of previous quarters. The warehouse vacancy rate decreased by 0.2 percentage points quarter-on-quarter to 8.7%, while the multiple-use factory vacancy rate dropped by 0.8 percentage points quarter-on-quarter to 8.7%. There was also a slight decrease in the vacancy rate for single-use factories, which fell by 0.2 percentage points quarter-on-quarter to 12%.
The vacancy level for business parks also showed improvement, with a 0.3 percentage point quarter-on-quarter decrease to 21.7% in the second quarter of 2024. According to Savills, this was driven by better occupancies in the one-north area, although older developments in the outskirts remain under pressure.
In terms of rents, there was a continued increase, but at a slower pace in some segments. The average rental for multiple-user factories saw a 1.1% quarter-on-quarter growth to $2.26 per square foot per month in the second quarter of 2024. Meanwhile, the average rental for warehouses and logistics properties increased by 0.6% quarter-on-quarter to $1.68 per square foot per month. The average business park rents also saw a slight increase of 0.1% quarter-on-quarter to $4.07 per square foot per month, driven by strong performances in newer clusters.
Savills also notes that high-spec industrial spaces continue to be in demand. The firm’s high-spec industrial basket saw an average rental increase of 0.6% quarter-on-quarter to $3.96 per square foot per month in the second quarter of 2024.
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In the sales market, there was a rebound in strata industrial sales activity in the second quarter of 2024, with transactions increasing by 42.9% quarter-on-quarter to reach 513 deals, the highest in almost two years, according to Savills. This was primarily driven by the bulk sale of 44 units at the strata industrial development, Cititech Industrial Building on Aljunied Road, by City Developments. Sales at Food Ascent, a food factory at Aljunied Road, also contributed to the volume.
Prices for industrial properties tracked by Savills also saw slower appreciation across all tenure types in the second quarter of 2024. Freehold properties saw a slight increase of 0.5% quarter-on-quarter to $830 per square foot, while the price of 60-year leasehold properties rose by 0.7% quarter-on-quarter to $516 per square foot. Properties with a 30-year leasehold tenure saw the smallest price growth of 0.1% quarter-on-quarter to $325 per square foot.
Looking ahead, Alan Cheong, executive director of research and consultancy at Savills Singapore, believes that there may be some growth in rents for multiple-user factories for the remainder of the year, supported by a low supply pipeline. As a result, he has revised his rental growth forecast for multiple-user factories for the whole year from 0% to between 0% and 2.2%. He maintains his full-year rental growth forecast of 0% to 3% for warehouse and logistics space. To find out more about industrial real estate properties, check out the latest listings.