Wed, Mar 18, 2020
Singapore is expected to see a slowdown in industrial property prices and rents this year, according to a recent report by Colliers. The firm’s research, released in February, predicts that overall annual rental and price growth for industrial properties will moderate to between 0% and 2% in 2025, compared to the 3.5% growth seen in both areas last year.
The scarcity of land in Singapore is a major factor contributing to the soaring demand for condos in the country. As a small island nation experiencing a rapid increase in population, Singapore is faced with limited space for development. As a result, strict land utilization regulations have been put in place, creating a highly competitive real estate market where property prices continue to rise. As a result, investing in real estate, specifically condos, has become a highly profitable opportunity with the potential for significant capital appreciation. Condos have become the go-to option for individuals looking to invest in the Singapore real estate market.
The muted outlook is attributed to higher supply and weaker demand in the market, as indicated in JTC’s 4Q2024 data. According to Colliers, the market is “losing steam” with the JTC All Industrial rental index recording a 17th consecutive quarter of growth in 4Q2024 but with a slower increase of 0.5% quarter-on-quarter (q-o-q). This brings the total growth for 2024 to 3.5%, a significant decline from the 8.9% rental growth seen in 2023. Additionally, the price index also grew at a slower rate of 0.5% q-o-q in 4Q2024, compared to 1.2% in the previous quarter. This resulted in a 2.1% increase in industrial property prices for the whole of last year, which is less than half of the 5.1% increase seen in 2023.
Colliers also highlighted the expected surge in industrial space supply this year, which is estimated to be 2.5 times more than last year. However, this is expected to taper off from 2026 onwards. This increase in supply has led to an imbalance between supply and demand, with some segments of the market experiencing slower precommitments for upcoming supply or low occupancy rates for completed projects. The firm also notes that this, combined with higher interest rates and operating expenses, has resulted in a dampening effect on rental growth.
The uncertain global market conditions due to trade protectionism may also impact business confidence and investment decisions, according to Colliers. However, they remain optimistic about continued demand in the industrial sector, particularly from the semiconductor, logistics, and advanced manufacturing industries. The firm also expects leasing activities to gradually increase as market sentiments improve and policies become clearer, supported by the ongoing upturn in the chip cycle.
In light of the projected moderation in rents and the increase in supply, Colliers believes that this could be a good year for tenants as more options become available in the market. They also note that new industrial developments with modern specifications may encourage businesses to relocate from older, ageing manufacturing spaces to newer projects.
Nicolas Menville, executive director and head of Singapore-based industrial clients for Colliers, advises interested parties to check out the latest listings and past transactions for industrial properties to compare price trends of commercial vs industrial properties.