Demand for industrial space increased by 303,000 sq m in 2Q 2023 against an increase in supply of 166,000 sq m. This pushed up the occupancy rate of industrial space by 0.3% in 2Q 2023. The multi-user segment demand expanded the most by 132,000 sq m.
Figure 1: Change in Supply, Demand and Occupancy Rate of Industrial Space
Source: JTC, Huttons Data Analytics as of 27 Jul 2023
Prices and rents of industrial space continued to grow by 1.5% and 2.1%, respectively in 2Q 2023 but at a slower rate. The growth in prices appeared to have stabilised as investors resist higher prices against an uncertain economic backdrop and persistently high interest rate. Rents continued to creep higher particularly in the multi-user and warehouse segments due to tightening vacant stock and landlords adjusting rents to hedge against higher mortgage payments.
Figure 2: Price and Rental Index of Industrial Space
Source: JTC, Huttons Data Analytics as of 27 Jul 2023
Sales of strata industrial units picked up in 2Q 2023 probably due to the cooling measures on the residential sector in Apr 2023. The largest quantum of $6.9 million was for a freehold 5,457 sq ft strata unit at Delta House. Investors were also drawn to strata food factory units as they bank on the strong growth potential of the food industry.
Figure 3: Transactions of Multi-User Factory and Warehouse Space
Source: JTC, Huttons Data Analytics as of 27 Jul 2023
Market Outlook
The manufacturing and non-oil domestic exports (NODX) are expected to remain in contractionary mode for the rest of 2023 but there are early signs that the bottom is near. Some industrialists may take the opportunity to expand ahead of demand. There will be another 0.6 million sq m of industrial space completing in 2H 2023. The bulk of the supply is the single-user factory space while multi-user supply remains low. The divergence in rent growth for single-user and multi-user factory space may persist in 2H 2023. Prices of industrial space may see not more than 5% growth in 2023 while rents could increase faster at up to 8%.