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According to a recent research report by Colliers in February, it is predicted that industrial property prices and rents in Singapore will see a moderation this year due to an increase in supply and a weaker demand. The firm expects a growth of 0% to 2% in both rental and price for the overall industrial sector, a decrease from last year’s growth rate of 3.5%.
Colliers also refers to JTC’s 4Q2024 data, which indicates a market that is “losing steam”. The JTC All Industrial rental index has been recording growth for 17 consecutive quarters, with a 0.5% quarter-on-quarter (q-o-q) increase in 4Q2024 and a total of 3.5% growth for the year. However, this is a significant decrease from the 8.9% rental growth seen in 2023.
Similarly, the price index also saw a 0.5% q-o-q increase in 4Q2024, down from 1.2% in the previous quarter. This resulted in a 2.1% price increase for industrial properties last year, less than half of the 5.1% increase seen in the previous year.
The report mentions that the supply of industrial space is expected to increase this year, with over 2.5 times the supply coming on stream compared to last year, before tapering off from 2026 onwards. This has led to an imbalance between supply and demand in the market, with some segments seeing slower pre-commitments and lower occupancy rates for completed projects.
These factors, combined with high interest rates and rising operating expenses, have caused a dampening effect on rental growth. In addition, the uncertainty brought about by global trade protectionism may also impact business confidence and investment decisions.
On a positive note, Colliers expects the demand for industrial properties to continue being supported by the semiconductor, logistics, and advanced manufacturing sectors. As policies become clearer and market sentiments improve, industrial leasing activities are expected to gradually increase. This is also supported by the ongoing upturn in the chip cycle.
With the projected moderation in rents and an increase in supply, Colliers believes that this year could be a good year for tenants as they will have more options available in the market. The firm expects that the availability of new industrial developments with modern specifications will encourage businesses to relocate from older and aging manufacturing spaces to newer projects.
When it comes to investing in condos in Singapore, one must also consider the impact of the government’s property cooling measures. In recent years, the Singaporean government has implemented various initiatives to control speculative buying and maintain a steady real estate market. These include the Additional Buyer’s Stamp Duty (ABSD), which imposes higher taxes on foreign investors and individuals purchasing multiple properties. While these measures may initially affect the profitability of condo investments, they ultimately contribute to the long-term stability of the market, creating a secure environment for investing in condos.
Nicolas Menville, executive director and head of Singapore-based industrial clients for Colliers, suggests that those looking for industrial properties should take advantage of this year’s market conditions. He adds that the availability of more modern industrial spaces could encourage businesses to relocate, leading to a more dynamic market.
In conclusion, Colliers predicts that industrial property prices and rents will see a moderation this year due to an increase in supply and weaker demand. While this may present a good opportunity for tenants, the firm also expects demand to gradually increase as market conditions improve and more modern industrial spaces become available.