Catherine He, Colliers Head of Research Singapore, comments on JTC’s Q1 2022 statistics released 28 April 2022. 

All Industrial:

The JTC All Industrial price and rental indices continued their sixth consecutive quarter of growth in Q1 2022. The rent index rose by 1.0% q-o-q in Q1 2022, continuing from 0.2% q-o-q in the previous quarter. This is also the strongest quarterly growth since Q3 2013. Trade indicators have exhibited a similar trend, with expansion recorded in manufacturing output, NODX and PMI, albeit with growth moderating.

Warehouse:

Among the various market segments, warehouses registered the highest rental increase of 1.5% q-o-q. On the back of improving occupancies and strong leasing activity, the vacancy rate went back to below 10.0% since Q3 2021. This is in line with Colliers Research’s observation; where availability for prime logistics space has been extremely tight and demand for storage space has spilled over to second-tier warehouses. Third party logistics players and end users have been actively looking for additional storage space to meet stronger consumption post-pandemic, especially amidst supply chain disruptions and a global shortage of semi-conductor chips.

Factories:

The rental indices for multiple-user and single-user factory also increased, albeit at a slower rate as compared to warehouses. Backed by strong government support, Colliers expects more firms to set up their manufacturing hubs in Singapore, with sustained growth in manufacturing and wholesale trade sectors to underpin demand for factory space in 2022.

Business Parks:

Business parks rents have maintained, recovering from last quarter’s 0.5% decline on the back of tighter vacancy. The demand for business parks, especially those in the city fringe, is expected to grow on the back of structural tailwinds, as they cater to growth industries such as the technology and biomedical sectors.

Outlook:

Due to past construction delays, most of the industrial supply pipeline will be coming onstream this year, with the majority factories. In addition to 25.8 mil sf more industrial space scheduled to complete this year, the average annual pipeline supply from present to 2025 at 12.9 mil sf, is almost double the 6.5 mil sf over the past three years. This anticipated surge in supply could slow the pace of price and rental growth.

In addition, with the re-opening of borders between Malaysia and Singapore, industrialists may not need to stock up as much goods as before to tide through the supply chain shortage; non- perishables goods could also be stored across the causeway to tap on the cheaper storage capacity. With the majority of Singapore residents vaccinated and Singapore progressing to an endemic stage, there will also be less storage space required for medical products. Older warehouses are also seeing resistance from SMEs for rental increases. All these factors might cause warehouse rental growth to taper in the coming quarters.

Further, geopolitical tensions have resulted in rising energy cost and supply chain disruptions, causing inflationary pressures and clouding the outlook of the manufacturing sector. As such, manufacturers might also become more cautious in their expansion plans.

Nevertheless, demand for industrial space, especially high specification warehouses, will still be underpinned by growth industries such as the food, media, logistics, technology and biomedical sectors, which in turn will support rental and price growth, albeit at a more measured pace.