Surge in industrial property supply could slow price and rental growth: Colliers

May 13, 2022

An anticipated surge in supply could slow price and rental growth in the industrial property sector, after 6 straight quarters of price and rental rises.

“With the robust supply pipeline, occupiers not in urgent need of space could wait for more options to come to market,” Colliers said in its Industrial Q1 2022 Report on Friday (May 13). It added that due to past construction delays, most of the industrial supply pipeline is coming onstream this year, with the majority factories.

Some notable projects in the pipeline this year include Perennial Business City and Soilbuild Group’s Solaris @ Tai Seng which both have gross floor areas of 1.1 million sq ft each. The 0.9 million sq ft Logos eHub at Pandan Crescent is also expected to obtain its Temporary Occupation Permit this year.

Colliers estimated that a total 25.9 million sq ft of new industrial space will be completed in the whole year of 2022, while net absorption is projected to grow by 16.4 million sq ft.

About 3.6 million sq ft had come onstream in Q1 2022. The quarter also saw industrial rents exhibit the strongest quarterly growth since Q3 2013, rising 1 per cent during the 3 months. Industrial prices have also followed the same upward trend, rising by 3.1 per cent — the steepest quarterly increase since Q1 2014.

That said, islandwide vacancy increased by 0.4 percentage point to 10.2 per cent in Q1 due to pickup in new supply.

“With the reopening of Singapore’s borders, industrialists may look to diversify their supply chains and tap alternative options for cheaper storage; they will also not need to stock up on as many goods as before to tide them through supply chain disruptions,” said Lynus Pook, executive director of industrial services at Colliers.

Prime logistics rents had the most uptick last quarter, growing 1 per cent quarter on quarter and 8.6 per cent compared to the year-ago period. High specification warehouse rents saw 0.7 per cent increase on the quarter and 0.4 per cent yearly growth.

The rise was driven by third-party logistics players and end users looking for additional storage space to meet stronger consumption post-pandemic, especially amid supply chain disruptions and a global shortage of semiconductor chips. Colliers expects that older warehouses may be taken off the market to be upgraded or redeveloped to meet the demand for these assets.

Rents for factories and warehouses saw no quarterly growth in Q1, but a yearly rise of 0.3 per cent and 0.9 per cent respectively, backed by Singapore’s growing position as a manufacturing hub. However, Colliers noted that rising energy costs and supply chain disruptions caused by geopolitical tensions might make manufacturers “more cautious” in their expansion plans.

Meanwhile, business park rents remained flat quarter on quarter in Q1, and fell 0.5 per cent compared to the same period last year.

That said, Colliers noted that with the limited supply of quality offices and higher office rents, more demand from the tech and services industries could continue to spillover to city fringe business parks.

“The drive for more robust supply chains, the switch to a just-in-case strategy, as well as the increasing digitalisation of industries and the economy should continue to support industrial rent and price growth, albeit at a more measured pace,” Colliers said.

https://www.businesstimes.com.sg/rea...rowth-colliers