The strong challenges faced during the circuit breaker period as well as the economic uncertainties “continued to subdue substantial movements in the leasing market”. Despite this, foreign companies are still looking to expand their operations in Singapore.
Singapore saw median rent of multiple-use factory spaces drop by 1.4% quarter-on-quarter and 2.2% year-on-year to $1.75 per sq ft per month (psf pm) during the third quarter of 2020, revealed a Knight Frank report.
This comes as leasing volume for such space declined 34.4% year-on-year to 1,577 transactions in July and August, which amounted to $5.7 million.
Knight Frank said the strong challenges faced during the circuit breaker period as well as the economic uncertainties “continued to subdue substantial movements in the leasing market”.
“Additionally, the greater availability of space options in the multiple-user factory space segment is characterised by competition among landlords for tenants where rents tend to be more volatile during times of recession,” it added.
In Q3 2020, the average price of multiple-user factory space had remained largely stable in most tenure categories.
Unit prices in developments with less than 99 years left in their lease continued to be relatively flat as manufacturers hesitate to relocate or expand to newer factories with higher prices.
“Despite the looming uncertainties, foreign companies are still looking to expand their operations in Singapore,” noted Knight Frank.
In Q3 2020, Zoom Video Communications opened a new data centre in the city-state, while Hyundai Motors revealed plans to take up the space left vacant by Dyson at Bulim Avenue.
Looking ahead, Knight Frank expects Singapore to continue “to be a favourable destination as a hub for companies worldwide”.
“With sustainable solutions and digital platforms becoming increasingly important and critical for businesses to adopt, demand for industrial spaces that cater to such uses is projected to expand in the short to medium term,” it said.
“Additionally, as more office users re-strategise their space requirements with the rising trend of working from home, business parks stand as one of the alternative options for cost-conscious qualifying occupiers.”
From Q3 2020 to 2024, about 53.7 million sq ft gross floor area (GFA) of industrial space is expected to enter the market. Of these, around 26.7% of the upcoming developments are forecasted to be completed by 2020.
Despite the recessionary environment, Knight Frank does not expect industrial rents and prices to moderate downwards by more than 5% for the entire 2020.