Higher Supply And Weaker Demand Put Downward Pressure Industrial Property Rents Colliers
Singapore’s industrial property market is set to experience a slowdown this year, as supply increases and demand weakens, according to a recent report by Colliers. The firm forecasts a 0% to 2% growth in both rental rates and prices for the year, compared to the 3.5% growth seen in 2024.
The report states that JTC’s 4Q2024 data shows a market that is “losing steam”. While the JTC All Industrial rental index continued to rise for the 17th consecutive quarter, recording a 0.5% increase quarter-on-quarter, this marks a significant decline from the 8.9% rental growth seen in 2023. Similarly, the price index also grew 0.5% quarter-on-quarter in 4Q2024, down from 1.2% in the previous quarter. This translates to a 2.1% increase in industrial property prices in 2024, which is less than half of the 5.1% growth seen in 2023.
The reason for the slowdown is attributed to the surge in supply expected this year, which is more than two and a half times the supply seen in 2024. However, this surge is expected to taper off from 2026 onwards. As a result, there is now a supply-demand imbalance in many segments of the market, with upcoming projects seeing slower pre-commitments and lower occupancy rates.
This trend is expected to continue, as occupiers exercise more caution due to high interest rates and escalating operational costs. The report also highlights the impact of heightened trade protectionism on global markets, which could potentially affect business confidence and investment decisions.
On the other hand, there are still some factors supporting industrial demand, such as the semiconductors, logistics, and advanced manufacturing sectors. As policies become clearer and market sentiments improve, Colliers expects industrial leasing activities to gradually increase. The ongoing upturn in the chip cycle is also expected to contribute to this trend.
The increase in supply and projected rental moderation presents an opportunity for tenants this year, as there will be more options in the market. According to Nicolas Menville, Executive Director and Head of Singapore-Based Industrial Clients for Colliers, businesses may be encouraged to relocate from older, ageing manufacturing spaces to newer projects with more modern specifications.
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Overall, while there are some uncertainties in the industrial property market, there are also some potential areas for growth. It will be important to monitor the market trends and developments closely in the coming months.