Higher Supply And Weaker Demand Put Downward Pressure Industrial Property Rents Colliers
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Singapore’s industrial property market is poised to see a moderation in prices and rents this year. According to a February research report by Colliers, higher supply and weaker demand will contribute to the expected slowdown. The firm is projecting a modest annual growth rate of 0% to 2% for both industrial rental and property prices in 2025, a significant decrease from the 3.5% growth seen in 2024.
Colliers’ report notes that JTC’s 4Q2024 data indicates a market that is “losing steam,” with the industrial rental index seeing its 17th consecutive quarter of growth but at a slower pace of 0.5% quarter-on-quarter. The total rental growth for the year amounted to 3.5%, a sharp decline from the 8.9% growth recorded in 2023. Similarly, the industrial property price index also saw a slowdown, with a quarterly growth of 0.5% in 4Q2024, compared to 1.2% in the previous quarter. This resulted in a 2.1% increase in industrial property prices for the year, less than half of the 5.1% recorded in 2023.
Colliers points to a surge in supply this year, with over 2.5 times the space coming on stream compared to last year. This has led to an imbalance in the supply-demand ratio, with upcoming supply facing slower precommitments or lower occupancy rates for completed projects. The report states that the higher supply and increased caution among occupiers, driven by high interest rates and rising operating expenses, will contribute to the dampening of rental growth.
In addition, global markets are experiencing uncertainty due to heightened trade protectionism, which could impact business confidence and investment decisions. However, Colliers also anticipates that the industrial demand will continue to be supported by the semiconductors, logistics, and advanced manufacturing sectors. As policies become clearer and market sentiments improve, the firm expects industrial leasing activities to gradually increase, driven by the ongoing upturn in the chip cycle.
With the projected moderation in rents and the increase in supply, Colliers suggests that this could be a good year for tenants, with more options available in the market. The firm also notes that new industrial developments with modern specifications could encourage businesses to relocate from older, ageing manufacturing spaces to newer projects.
Nicolas Menville, executive director and head of Singapore-based industrial clients for Colliers, says, “New industrial developments, equipped with more modern specifications, could encourage more businesses to relocate from older, ageing manufacturing spaces to newer projects.”
In summary, the industrial property market in Singapore is expected to see a moderation in both prices and rents this year, driven by higher supply and weaker demand. However, there are still pockets of growth in the semiconductors, logistics, and advanced manufacturing sectors, and industrial leasing activities are expected to gradually increase over time.