Prices, rents of industrial space fall in Q2, more downward pressure to come: JTC

Prices and rentals of industrial space fell year on year in the second quarter and will continue to be under downward pressure in coming quarters due to the pandemic, said industrial land and infrastructure agency JTC Corp.

Prices of industrial space declined by 1.7 per cent year on year and 1.1 per cent quarter on quarter. Rents came down by 0.8 per cent year on year and 0.7 per cent quarter on quarter. Occupancy rates bucked the trend by edging up 0.1 percentage point year on year and 0.2 percentage point quarter on quarter to 89.4 per cent, lifted by single-user factory and warehouse space. This stemmed from pre-commitments as well as stockpiling and storage. However, occupancy rates for multiple-user factories and business park space fell.

Pointing out that the data might not have fully captured the economic impact of Covid-19, JTC said: “Some transactions were pre-committed before the ‘circuit-breaker’ measures, and there was a relative lack of recent market transactions.”

JTC also flagged that most construction activities were halted due to the circuit breaker, and some project owners were unable to provide complete assessments on construction progress. For statistical compilation and reporting, the expected completion periods for such projects were extended by three months from the original expected completion period.

As at end June, around 1.3 million square metres (sq m) of new industrial space was expected to be completed in the second half of this year, but only 0.2 million sq m of new industrial space was completed in the second quarter. This suggests that new industrial space will not meet the earlier projection of 2.1 million sq m for 2020.

JTC added: “We can expect further delays in completion for some industrial building projects, as project owners and contractors adjust to meet the Building and Construction Authority’s ‘Safe Restart’ requirements.”

Head of research for Knight Frank Singapore, Leonard Tay, expects that industrial rents and prices could fall by about five per cent this year. Even as production in the manufacturing sector gradually picks up over the next 12 to 18 months with the restart of activity both locally and globally, upcoming industrial supply and the economic recession will mean a slow road to recovery. “Industrial space users will be tentative in expanding their physical space requirements until such time when recovery is more certain,” he added.

CBRE Research expects factory rents to be less resilient, given the current economic climate. However, “heightened demand for prime logistics spaces as well as the limited upcoming supply compounded by delays in project constructions could help to lend some support to overall warehouse rents,” added Desmond Sim, head of research (South-east Asia) for CBRE.

There were 147 units totalling about 74,000 sq m in uncompleted developments available for sale at the end of Q2 2020, JTC’s latest report showed.

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