Industrial Leasing Transactions 58 Q O Q 3Q2024 Knight Frank
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Industrial leasing activity in the third quarter of 2024 saw an increase, supported by a rebound in the manufacturing sector. According to Knight Frank Singapore’s latest quarterly industrial and logistics report, data showed that there was a 5.8% quarter-on-quarter growth in industrial property leasing transactions, reaching 3,304 leases. This also resulted in a 1.6% increase in the total value of rental transactions, amounting to $29.1 million last quarter. Comparing it to the same quarter last year, there was a 2.3% growth in leasing transactions.
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The pick-up in leasing activity can be attributed to the 9.9% quarter-on-quarter expansion in the manufacturing sector in the third quarter of 2024, based on the advance estimates by the Ministry of Trade and Industry. All manufacturing sectors, except for biomedical manufacturing, saw an increase in output.
Additionally, data from the Economic Development Board indicated that Singapore’s total manufacturing output, excluding biomedical manufacturing, increased by 27.5% year-on-year in August. The growth was mainly driven by the electronics cluster, which had a 49.1% year-on-year spike. This was due to last year’s low semiconductor production base and a higher demand for electronics.
In terms of rents, industrial properties across the island experienced quarterly growth of 0.8% and 0.9% in the 25th and median categories respectively in the third quarter of 2024. However, the rent in the 75th percentile saw a decrease of 3.6% quarter-on-quarter.
Nevertheless, rents for single-use factory spaces across the island saw growth in all percentiles. The rent in the 75th percentile saw the highest increase of 11% quarter-on-quarter, amounting to $2.47 per square foot per month (psf pm). This was followed by the rent in the 25th percentile, which had a 2% increase to $1.55 psf pm, and the median category, which saw a 0.6% increase to $1.80 psf pm.
Aside from the rebound in the manufacturing sector, the optimistic outlook and expectations of a long-awaited interest rate hike by the US Federal Reserve also contributed to an increase in industrial sales activity. Knight Frank’s report revealed that industrial property sales reached $3.1 billion across 456 deals, an increase of 199.6% quarter-on-quarter and 206% year-on-year in the third quarter of 2024.
This surge in sales volume can be attributed to major deals made in August, with investors anticipating interest rate cuts and a return of positive carry. The biggest deal was the $1.6 billion sale of a portfolio of seven industrial properties by Blackstone and Soilbuild Group to a joint venture between Lendlease and Warburg Pincus.
Other notable transactions in August include ESR LOGOS REIT’s purchase of a 51% stake in an industrial building at 20 Tuas South Avenue 14 for $444.6 million and Ho Bee Land’s sale of a 49% stake in Elementum, a biomedical sciences development in Buona Vista, to a Brunei sovereign wealth fund for $272 million.
Moving forward, the head of occupier strategy and solutions at Knight Frank Singapore, Calvin Yeo, predicts that the industrial real estate market will continue to gain momentum. With the electronics sector leading manufacturing growth, he expects an increase in market activity in the industrial sector alongside interest rate cuts. He also anticipates an increase in transaction volume, driven by sales of multiple-user factory spaces and warehouses. Yeo believes that with the more favorable borrowing environment, individual buyers purchasing for business use and private equity funds acquiring assets for investment will start to make their move.
Yeo also predicts that industrial property rents and prices will remain stable for the rest of the year, with the market poised for further growth in 2025.