Demand for Industrial Property Rises Due to Flight to Quality

According to Colliers International’s real estate professional Dominic Peters, the demand for industrial real estate in Singapore continues. Many individuals are looking for high-quality examples, but the demand far outweighs the supply. Additionally, the occupancy rate for all Singapore industrial space is down one-tenth of a percentage point to 89.2%. The price index of all of the industrial space was down by two-tenths of a percentage point as well. Please see a Penrose Price Details here.

Of course, the hardest-hit seemed to be in the single-user factory category. They saw a larger drop of at least 0.3%, with the most notable losses occurring in the fourth quarter of 2019. The reason this happened was that the occupancy rate for factories has been continuously dropping by 0.1% on a yearly basis. It was bound to catch up to them sooner or later. Tricia Song, who is head of the research department for Collier International, noted that one of the reasons for this phenomenon was because of net supply outstripping new demand.

Brenda Ong, who is a real estate executive at Cushman and Wakefield, has high expectations for the industry. She thinks that the factory sector will even out for the 2020 rent. She is especially optimistic about the multi-industrial factory rent market.

“The one-user factory market will rebound from some negative publicity, and it will see industrialists either give up or change their strategy and decided to put forth a reduced footprint,” Ong said. “Moreover, we are already seeing warehouse rents stabilizing and we expect that they will marginally increase as a healthy demand returns.”  Indeed, her fellow associate Desmond Sim believes that this and the fact that domestic exports are going through expansion for the first time since February 2019 is a good sign that an economic recovery is on the way.

Unfortunately, there are other real estate experts who simply do not share his optimism. Tay Huey Ling is one individual, and he said the following: “The industrial rental market could indeed experience a turnaround, but it is, of course, beholden to external circumstances. Additionally, such things as value-added industries are expected to outperform.”

Interestingly enough, the Business Park category had rents increasing by 1.3%. This is in addition to the total occupancy in all of these buildings also increasing by a 1.3% margin.

“Business Park rents are expected to increase due to supply and demand,” Colliers’ Peters stated. “We also expect that centrally located properties will be in higher demand and be able to command higher premiums. On the other hand, properties that are further away from the MRT stations will have some serious difficulty in attracting tenants, even if they have lower rent premiums.”

Another thing that calls for optimism would be inherent in the fact that at least five out of the seven new developments are being purposely built and have already gotten occupants to sign up for space even though they are still in the construction stage. Such things as the construction of new 5G networks will also probably increase the demand for factories making semiconductors.

Taking all of this into consideration, there is no reason why Singapore real estate professionals shouldn’t have at least guarded optimism.

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