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• The JTC All Industrial Rental Index increased by 0.3% q-o-q in Q3 2024, with momentum easing from the previous increase of 1.0% q-o-q in Q2 2024. This marks the 16th straight quarter of rental increase. Although the JTC All Industrial Rental Index has risen by 22.5% since the trough in Q3 2020, the current quarter marks the first time since Q2 2020 that rental momentum has moderated across all market segments.
• Among the various market segments, rents for the multi-user factory segment increased the most by 0.6% q-o-q, moderating from the 1.5% q-o-q growth in the previous quarter. Apart from the completion of One KA @ Macpherson, there were no other multi-user factory completions in Q3 2024. With net absorption by occupiers continuing to be healthy, occupancy rate increased by 0.3 ppt to 91.6%, its highest point since Q4 1996. CBRE Research observed that technology and manufacturing firms continue to be most active in seeking high specifications facilities, following through from the demand in Q2 2024.
• Rents for the warehouse segment rose by 0.1%, as momentum eased from the 0.5% increase in the previous quarter. Apart from the completion of a warehouse facility at 457 Tagore Industrial Avenue, there were no major warehouse completions in Q3 2024. During the quarter, occupancy rate declined by 0.2 ppt to 91.1%, marking the first negative net absorption since Q1 2023. While performance for the warehouse segment is still relatively resilient, CBRE Research observed that expansionary demand has moderated as e-commerce and 3PL occupiers are in consolidation mode. That said, landlords are actively exploring asset enhancement initiatives or redevelopment opportunities to convert general warehouse facilities into modern prime logistics assets.
• The business park segment continued to come under pressure as rents dipped by 0.2% q-o-q in Q3 2024, a slight acceleration from the 0.1% q-o-q decline in Q2 2024. While JTC’s vacancy rate showed some improvement, falling from 21.7% in Q2 2024 to 21.2% in Q3 2024, it remains high compared to historical levels. Notably, vacancy rates have stayed above 21% for the fourth consecutive quarter. That said, CBRE Research has observed that performance for the business park segment remains uneven, as factors such as micro-market, building age and specifications would impact rental and occupancy rates.
• Lastly, rents for the single-user factory segment decreased by 0.3% q-o-q, a reversal from the 1.3% q-o-q growth in Q2 2024. This marks the first decrease in rents for the single-user factory segment since Q3 2020. Occupancy rate decreased by 0.3 ppt to 87.7% in Q3 2024, the lowest level on record for the segment as take-up was lower than new supply. During the quarter, major project completions were Sanofi’s new 0.33 mil sq. ft. production facility at 5 Tuas South Street 2 (partial TOP), as well as the remaining phase of Keppel DC Singapore 8 located at 82 Genting Lane.
• Prices increased by 0.5% q-o-q in Q3 2024, moderating from the 1.2% increase in the All-Industrial Price Index in Q2 2024. This marks the second quarter of prices increasing at a faster rate than rents. The increase was mainly driven by the multi-user factory segment as it saw a 0.7% q-o-q growth in Q3 2024, moderating from the 1.7% q-o-q increase in Q2 2024. The single-user factory segment also saw a 0.2% q-o-q increase during the quarter, also easing from the 0.3% q-o-q growth in Q2 2024. With the U.S. Federal Reserve cutting the Federal Funds Rate by 50 basis points at September's Federal Open Market Committee (FOMC) meeting, along with anticipated future interest rate cuts, investor sentiment has improved. Investor interest for leasehold industrial assets continue to be resilient due to the positive carry.
• As at end-Sep 2024, about 2.6 mil sq. ft. of new industrial space (or around 0.5% of total stock) is scheduled for completion in Q4 2024. Of the upcoming supply, business park, single-user factory and warehouse accounts for 33%, 31% and 30% of pipeline space respectively. The remainder is multi-user factory space which accounts for 6%.
Outlook
• According to advance estimates from the Ministry of Trade and Industry (MTI), Singapore’s economy continued its growth in Q3 2024 as GDP expanded by 2.1% q-o-q on a seasonally adjusted basis, faster than the 0.4% q-o-q increase in Q2 2024. The manufacturing sector grew by 7.5% y-o-y, rebounding from the 1.1% y-o-y contraction in the previous quarter.
• The rebound in manufacturing and exports can be attributed to the strong performance of the electronics cluster, driven by improved semiconductor sales due to rising adoption of artificial intelligence applications, as well as consumer electronics products such as smartphones and PCs.
• While the leasing environment remains steady, occupiers continue to be cautious as they rein in costs. Most leasing transactions are focused on renewals and relocations. CBRE Research observed that landlords are gradually turning accommodative by offering more rent-free periods or fitout incentives, especially for properties with outdated specifications. Selected occupiers seeking to right size their real estate footprint are likely to relocate to higher-spec facilities with good connectivity to amenities, as talent retention remains crucial for employers.
• As for the prime logistics segment, rents have risen by 42.7% since the trough in Q1 2020, leading to greater resistance among occupiers. While rents grew by 1.1% in H1 2024, growth came to a halt in Q3 2024 as occupiers consolidated amidst inflationary pressures. Additionally, ongoing port congestion stemming from the Red Sea crisis is expected to persist until year-end, prompting occupiers to adopt a more measured approach in their expansion plans as they navigate supply chain challenges. Looking ahead, prime logistics supply is projected to peak in 2025, presenting an opportune time for occupiers to secure prime logistics space amidst less competitive market conditions compared to 2023.
• According to business park rents tracked by CBRE Research, while rental performance has held steady in H1 2024, the segment is still expected to face increased pressure for the remainder of the year. This pressure is expected to arise from increasing vacancy rates due to non-renewals of leases in certain buildings. In addition, with more project completions scheduled from Q4 2024 to 2025, it will likely result in a more competitive leasing landscape.
Read JTC's Industrial Property Market Statistics for Q3 2024 here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2023 revenue). The company has more than 130,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
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