Higher Supply And Weaker Demand Put Downward Pressure Industrial Property Rents Colliers
According to a Colliers research report in February, industrial property prices and rents in Singapore are expected to decrease this year due to higher supply and weaker demand. The firm is projecting a growth of 0% to 2% for both overall annual industrial rental and price growth in 2025, compared to the 3.5% growth recorded last year.
Colliers notes that the market is showing signs of slowing down, as seen in JTC’s 4Q2024 data. The JTC All Industrial rental index had its 17th consecutive quarter of growth in 4Q2024, rising 0.5% q-o-q and a total growth of 3.5% for the year. However, this is a significant decline from the 8.9% rental growth in 2023. Similarly, the price index only grew 0.5% q-o-q in 4Q2024, compared to 1.2% growth in the previous quarter. This is also lower than the 2.1% increase in industrial property prices seen last year, which is less than half of the 5.1% increase in 2023.
One of the reasons for the muted outlook is the expected surge in supply of industrial space this year, with more than double the supply compared to last year. This imbalance between supply and demand has led to slower pre-commitments and lower occupancy rates for completed projects. In addition, cautious occupiers due to high interest rates and operating expenses, combined with uncertainty in global markets due to trade protectionism, are also expected to dampen rental growth.
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However, certain sectors such as semiconductors, logistics, and advanced manufacturing are expected to continue driving industrial demand. Colliers also predicts a gradual increase in leasing activities as policies become clearer and market sentiments improve, fueled by the uptrend in the chip cycle.
With an increase in supply and projected moderation in rents, Colliers believes this could be a good year for tenants as they will have more options in the market. Newer industrial developments with modern specifications could also attract businesses to relocate from older, aging spaces. Nicolas Menville, executive director and head of Singapore-based industrial clients for Colliers, says this could be an opportunity for businesses to upgrade to more modern and efficient spaces.
In conclusion, Colliers expects a moderation in industrial property prices and rents in Singapore this year due to a surplus in supply and weaker demand. However, certain sectors will continue to drive demand, and there could be opportunities for businesses to upgrade to newer, more modern spaces.