Savills Research reveals that strata industrial sales activity has seen a recovery of 42.9% quarter-on-quarter (QoQ) to 513 transactions in the second quarter, the highest level in almost two years.

This is largely driven by the sales increase in multiple-user factory and warehouse spaces. While the major contribution was mainly because of the sale of a portfolio of 44 units at Cititech by City Developments Ltd, another significant contribution came from the sales for a multiple-user factory – Food Ascent – the new ramp-up food factory launched for sale in Q1/2024.

Savills’ basket of industrial properties has recorded a slower price appreciation across all tenure types in Q2. Prices for freehold and 60-year leasehold industrial properties increased slightly by 0.5% to S$830 per sq ft and 0.7% QoQ to S$516 per sq ft respectively. Those for 30-year leasehold industrial properties inched up only 0.1% QoQ to S$325 per sq ft in Q2.

Meanwhile, after six consecutive quarters of increase, the islandwide vacancy level for business parks has dropped by 0.3 of a percentage point (ppt) QoQ to 21.7% in the second quarter. Although occupancy rate in the one-north area has improved, the occupancy rate for older developments in the outskirts remains under pressure. The demand in the East Planning Region has also been softening as the key takers – businesses in technology and back-end banking operations – are downsizing or relocating to less costly areas. Things are more challenging for the other older cluster, International Business Park, where the vacancy rate has been hovering above that of Changi Business Park.

Savills’ standard business park monthly rents posted a muted increase of 0.1% QoQ to S$4.07 per sq ft in Q2. Nonetheless, the newer clusters continue to lead overall rental growth for business parks, with Savills’ prime business park monthly rents increasing by 3.3% QoQ to S$6.31 per sq ft in the second quarter.

High-spec industrial spaces, especially those with good amenities and accessibility, continue to remain attractive. Alongside the strong rental level of recent developments, high-spec industrial rents are holding up. The Savills’ high-spec industrial basket posted an average rental increase of 0.6% QoQ to S$3.96 per sq ft in Q2.

Sally Tan, Senior Managing Director and Head of Client Solutions at Savills Singapore says, “While demand for some of the older business parks has slipped, we are still seeing overall rental growth for business parks, especially among the newer clusters. The quality of the industrial space, especially high-spec ones with good amenities and accessibility are still attractive. For the asset owners invested in upgrading their industrial properties, they will see their rents increase in the long term.”

Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore comments, “The supply pipeline for multiple-user factories is low this year, thus rents for this segment may still rise. Moreover, the units in such factories are generally smaller, hence, they are sought after by tenants who wish to keep their overheads low.

“On the other hand, overall business park vacancy is likely to remain under pressure before the newly completed space can be absorbed. Older properties will also continue to face occupational challenges as tenants with budgets may be drawn to newer business parks while those who face rental constraints may settle for pure no-frills or high-spec industrial space. Business Park rents may also come under further pressure, with the completion in the newer digital districts, compounding problems especially for the older developments. We are revising our rental forecast for multiple-user factory space from 0% to 2.2% for 2024. For the warehouse and logistics space, we maintain our forecast of 0% to 3% increase for the year,” he adds.

For further information, please contact Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore and Sally Tan, Senior Managing Director and Head of Client Solutions at Savills Singapore as the details below.