According to a February research report by Colliers, the prices and rents of industrial properties in Singapore are expected to slow down this year due to an increase in supply and a weaker demand. The firm predicts an annual growth rate of 0% to 2% in both rental and price for 2025, compared with the 3.5% growth rate recorded last year.
The latest data from JTC for the fourth quarter of 2024 indicates that the industrial market is losing momentum, as stated by Colliers. The JTC All Industrial rental index has recorded growth for the 17th consecutive quarter, rising by 0.5% quarter-on-quarter (q-o-q) and resulting in a total growth of 3.5% for the year. However, this is a significant decrease from the 8.9% rental growth seen in 2023. The price index also grew by 0.5% q-o-q in the fourth quarter of 2024, a decline from the 1.2% growth in the previous quarter. Last year, industrial property prices rose by 2.1%, which is less than half of the 5.1% increase seen in the previous year.
With over 2.5 times the supply of industrial space expected to come on stream this year, Colliers anticipates a surge in supply before it tapers off starting from 2026. This has resulted in an imbalance in the supply and demand for industrial properties, with certain segments of the market experiencing slower pre-commitment rates for upcoming supply or completed projects with lower occupancy. As a result, rental growth is likely to remain dampened.
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Additionally, the caution amongst occupiers, brought about by persistently high interest rates and rising operating expenses, is expected to further impact demand. Moreover, the heightened trade protectionism has created uncertainties in the global market, possibly affecting business confidence and investment decisions.
On the other hand, Colliers is optimistic about the growth in demand for industrial properties, particularly in the semiconductor, logistics, and advanced manufacturing sectors. It also foresees a gradual increase in industrial leasing activities as policies become clearer and market sentiments improve, supported by the ongoing upturn in the chip cycle.
In light of the projected moderation in rents and the increase in supply, this year could be a good opportunity for tenants, as there will be more options available in the market. The upcoming industrial developments, equipped with modern specifications, may attract businesses to relocate from older manufacturing spaces to newer projects, according to Nicolas Menville, the executive director and head of industrial clients in Singapore for Colliers.