Industrial rent growth in the fourth quarter of 2022 increased by 2.1% year over year, reaching 6.9%

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Industrial rents increased in 2.1% q-o-q in 4Q2022 and remained at the same rate of growth recorded in during the previous quarter, according to the data published by JTC on the 26th of January. This is the 9th consecutive quarter of growth, which brings the total rental increase at 6.9% for 2022, surpassing the 2% increase recorded in 2021.

Prices for industrial properties have increased in 1.7% q-o-q in 4Q2022 which brought the full-year rate of growth at 7.5%. “This is the highest pace of price growth, both in terms of as well as rents since 2012,” says Lee Sze Teck, senior director of studies for Huttons Asia.

The overall occupancy rate for industrial properties decreased to 0.3 percentage points during 4Q2022 in the 4Q2022 period to 89.4%. The drop was driven by an impressive increase in new building completions, which saw 5.2 million square feet of industrial space being completed in 4Q2022 – – the highest since the year 2017. The increase in supply was greater than the demand, which stood at 2.9 million square feet in 4Q2022, which is based on the amount of stock that was occupied.

Multi-user factories experienced the greatest rent increases in the 4Q2022, with increases by 2.6% q-o-q. Tricia Song, the head of research Southeast Asia at CBRE believes the rise may be due to the higher rents that were realised at recently completed projects , such as INSPACE located at Industrial Road and 165 Kallang Way. “While the overall occupancy rates for multi-user facilities have decreased by 0.1 percentage point between q-o-q as well as 1.1 percentage points over the course of the 4Q2022 period, CBRE Research believes that there’s a trend towards higher quality, as the demand for more modern and better-quality factories, particularly high-tech industrial spaces has been steady and they command higher rents,” she adds.

For the entire 2022 Multi-user factories experienced rent increase by 8.3%, the highest in all industrial sectors and exceeding that of 2.5% growth registered in 2021. “We believe that this is driven predominantly by the shortage of space for high-quality and highly-specified spaces for industrial use,” notes Tay Huey Yun, the head of research and consultancy Singapore for JLL. Tay observes that the net absorption of multi-factory spaces in 2022 will be the highest to this point.

Warehouse rents rose in 2.2% q-o-q in 4Q2022 which was a significant increase from the 1.9% growth registered in 3Q2022. Warehouse occupancy improved by 0.9% q-o-q to reach 91.7% in 4Q2022, which CBRE’s Song notes as the highest since 3Q2015. The full-year growth in warehouse rental came as 7.9%, compared to 2.7% in 2021, CBRE’s Song is attributed to the steady demand, as companies continued the “just-in-case” inventory plans due to the ongoing conflict between Russia and Ukraine as well as the tight supply of new inventory.

Lam Chern Woon, head of research and consulting at Edmund Tie, points out that warehouses were the only segment to show an increase in occupancy during 4Q2022. “Despite some warehouse completions in the period, overall stock in warehouses fell by 9,000 sqm. This is probably because of the elimination of some stocks to make room for the needs of modern logistics,” he expands.

Single-user factory rental were up 1.3% q-o-q, while business park rents increased to 1.0% q-o-q in 4Q2022. Brenda Ong, executive director for industrial and logistics for Cushman & Wakefield, adds that the business park sector is still a two-tiered market in which rents and demand are significantly higher for business parks in the city fringe when compared to adjacent counterparts.

In the future Edmund Tie’s Lam anticipates slower growth in rental in 2023, due to the external environment becomes more challenging. “Industrialists are likely to be cautious while leasing demand in outward-oriented industries like manufacturing and electronics are likely to decrease as a result of the downturn in semiconductors globally,” he explains.

Additionally, the influx of supply could limit the growth in rental. Around 18.9 million square feet of new production is anticipated to be in operation by 2023 this Huttons’ Lee highlights is the biggest amount since the year 2017. About half of the latest constructions are single-user factories and new warehouses will make up 5.3 million square feet.

Leonard Tay, head of research at Knight Frank Singapore, believes that industrial rents will keep increasing in 2023, but at a slow rate. “Despite the coming shortage of industrial resources amid a decline in exports and declining manufacturing confidence, Singapore will continue to draw fixed asset investments into the manufacturing industry as multinational companies search for countries that have stability with a well-educated workforce as well as modern infrastructure in their flight-to-stability strategy,” he opines.

He predicts that industrial rental growth by 1% up to% for the entire period of 2023. He also says that in the logistics sector in which space is scarce renting for warehouses with high-quality space could rise up to three% or 5%.

Cushman and Wakefield’s Ong is in agreement. She predicts rent growth and industrial prices to slow to around 1% up to% by 2023. Meanwhile, warehouse rents may still be higher than due to the robust demand.