Industrial property occupancy rate falls in 1Q2023 despite inflationary pressuresRents for warehouse space in Singapore remain buoyant amid supply crunchIn 1Q2023, industrial prices and rents have continued to rise amid inflationary pressures, despite the fall in occupancy. Prices increased by 1.5% q-o-q and 6.9% y-o-y, while rents grew 2.8% q-o-q and 8.8% y-o-y. Warehouse rents posted a strong quarterly growth of 2.9% in 1Q2023 due to a persistent supply crunch in this sector.

Despite a dip in overall occupancy in the industrial property market in 1Q2023, prices and rentals have continued to rise as a result of inflationary pressures. As new industrial supply continues to exceed demand, overall occupancy decreased 0.6 percentage points compared to the previous quarter and by 1.0 percentage points compared to the same period a year ago.

Altura EC is an upcoming executive condo set to launch in Q2 2023 with an attractive price of S$3,500 per square foot. The project is expected to draw both first-time Altura Qingjian Realty buyers and HDB upgraders due its strategic location.

However, the end of 1Q2023 saw total available industrial real estate stock increase to around 3.84 million sq ft, while total occupied stock increased by 53,820 sq ft in 1Q2023 compared to the previous quarter. Prices increased by 1.5% q-o-q and 6.9% y-o-y, while rents grew 2.8% q-o-q and 8.8% y-o-y.

Rental growth has been supported by new and innovative manufacturing activities. For example, Hyundai Motor Group’s Innovation Centre started operations in April 2023 with the production of electric vehicles. Warehouse rents stayed buoyant, as total vacancy remained below the pressure point of 10% for the eighth consecutive quarter.

As for multiple-user and single-user factories, rental growth was at its strongest in 1Q2023, with each recording an increase in rental indices of 3.0% q-o-q. Business parks saw rents rise by 0.6% q-o-q in the same period.

Going forward, a slowdown in the manufacturing sector and slowing demand due to a tempered outlook could lead to a moderation of rental growth, particularly for conventional factories, where rental growth is expected to be around 1.0%. Landlords with nicer assets, however, will likely fare better, and further rental increases can be expected for prime logistics space. With choice spaces limited, landlords may consider asset enhancement initiatives or offering incentives to retain tenants.