Prices and rents of industrial space continued to grow by 1.7% and 2.1% in 4Q 2022. On a year-on-year basis, prices jumped by 7.5% while rents went up by 6.9% in 2022. This is the fastest pace of increase for both prices and rents since 2012.
Occupancy rate of industrial space eased by 0.3% in 4Q 2022 but this was due to a large completion of 486,000 sq m of industrial space in the quarter. Demand for industrial space remained healthy with a take-up of 268,000 sq m in 4Q 2022. There was probably some stockpiling of goods by e-commerce companies for the festive season in Dec 2022 and Jan 2023 and to hedge against supply chain concerns. Demand for warehouse space increased by 91,000 sq m in 4Q 2022.
Investors continued to chase after industrial space in 4Q 2022 as it is probably the segment that offers a yield in excess of interest rate. Landlords on the other hand increased rents to compensate for the higher mortgage installments.
While the manufacturing sector has seen some slowdown in the past few months, there may be some light at the end of the tunnel. China’s relaxation of border controls may lead to a recovery in global demand for goods and provide support for Singapore’s manufacturing sector.
The completion of 1.8 million sq m of industrial space in 2023 is the largest since 2017. This may add downward pressure on prices and rents in 2023. Prices and rents of industrial space may see not more than 3% growth in 2023.