Oct 23, 2020
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Industrial rents and prices continued to drop in Q3 2020, falling 0.9% and 2.2%, respectively, from Q2 2020. 

Industrial rents and prices continued to drop in the third quarter of 2020, falling 0.9% and 2.2%, respectively, from the previous quarter, showed latest real estate statistics from JTC on Thursday (22 October).

On an annual basis, rents and prices declined 1.6% and 3.9%, respectively.

Rent declines were seen across both the warehouse and factory submarkets. The JTC Multiple-User Factory Rental Index declined 1.1% quarter-on-quarter, while the JTC Single-User Factory Rental Index slipped 0.7% quarter-on-quarter. 

“While there has been some demand for buildings with higher specifications, rents may be weighed down by older non-high specs buildings, which form a larger proportion of overall factory stock,” said CBRE’s Head of Research for South-east Asia, Desmond Sim. 

The JTC Warehouse Rental Index also dropped 1.1% quarter-on-quarter in Q3 2020, partly due to the easing of government stockpiling efforts.

Despite the decline, Sim noted that macro industrial indicators “demonstrated positive blips – manufacturing output rose by 13.7% year-on-year and non-oil domestic exports edged up by 5.9% year-on-year in August 2020, while purchasing managers’ index expanded for the third consecutive month at 50.3 in September 2020”.

Meanwhile, the overall industrial occupancy increased by 0.2 percentage points during the quarter under review. 

Specifically, single-user factory occupancy fell 0.1 percentage points to 91%, while multiple-user factory occupancy rose 0.3 percentage points to 87.8%. Warehouse occupancy, on the other hand, “sustained its expansion from the previous quarter by 0.8 percentage points to 89.1% in Q3 2020”, said Sim. 

Leonard Tay, Head of Research for Knight Frank Singapore, said the drop in prices is “considered modest, and could have been worse given the scope of the economic fallout from COVID-19”.

He attributed the drop in rent and the stability of occupancy levels to “landlords being willing to lower rental expectations, in order to keep their units occupied knowing the difficulties their tenants faced”. 

He added that the fiscal support measures rolled out by the government to sustain enterprises and preserve jobs have also “contributed to the resilience of industrial prices and rents, as well as provided support for occupancy levels in business parks, factories and warehouses in Q3 2020”.

“Thus far, the moderation in industrial rents and prices have been rather benign and are not expected to decrease by more than 5% for the whole of 2020, despite the current recessionary environment,” said Tay.

JTC revealed that about 4.4 million sq m of industrial space is expected to be completed between 2021 and 2024.

Of these, completion of 0.7 million sq m of space was delayed from 2020 to 2021 and 2022 due to COVID-19’s impact on the construction sector.

“Including the expected supply of 0.6 million sq m in the last quarter of 2020, this amounts to an average annual supply of about 1.2 million sqm from now until end 2024,” it said.

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