Singapore Q1 business park rental growth hits record highs since Q2 2017

Business park rents grew by 2.1% q-o-q in Q1 2024.

​​According to a Colliers report, Singapore’s industrial rental growth was positive across all segments, despite declining overall occupancy in all segments (apart from the multiple-user factory segment where it was flat) and negative net absorption. 

“Business parks and single-user factory drove overall industrial rental growth at 2.1% q-o-q each; this is also the highest quarterly growth recorded for business parks since 2Q 2017,” the report said.

Here’s more from Colliers:

The price index declined by 0.2% q-o-q, its first decline after thirteen quarters of consecutive growth. Growth for both price and rents are expected to continue moderating in light of slowing global growth and higher supply. 

Factory

The rental indices for multiple-user/single-user factory have increased by 1.3%/2.1% q-o-q respectively, to come in at 8.9%/6.1% y-o-y. Demand at multiple-user factories, especially higher specification spaces, were driven by biomedical and engineering firms, albeit at a slower pace, with most tenants looking at smaller spaces (<10k sf). 

For single-user factories, there is a surge of supply coming on stream in 2024 though these are typically developed by the industrialists for their own use; demand in this segment has been supported by advanced manufacturing players. 

However, together with overall softer demand and leasing activity, rental and price growth for both types are likely to slow going forward. 

Warehouse 

The segment registered a rental increase of 2.0% q-o-q and saw occupancy decline to 91.1% from 91.6% in the previous quarter. Supply continued to be tight this quarter, especially in the prime logistics space where there is no upcoming supply for the rest of the year. 3PLs and consumer products are the main demand drivers for warehouses. 

However, more space will be coming to the market as some tenants downsize or relocate in view of elevated rents, coupled with higher supply completing in 2025. Occupiers might also be resistant to the higher rents and more may opt to develop sites themselves, partner with a developer, or relocate to cheaper locations. This is likely to cause occupancy rates and rents to ease further. 

Business Parks

Business Park rents grew by 2.1% q-o-q in Q1 2024, the fastest growth since 2Q 2017. This is likely to be driven by the newer and better located business parks. On the other hand, occupancy has declined by 40 bps to 78.0% this quarter, with vacancies remaining elevated, especially in the outlying and older business parks, which could lead to softening rents. Overall demand for business park spaces remained muted, with more renewals and occupiers right-sizing. Space requirements are also small, at <10k sf. 

Older buildings or those in decentralized areas have been observed to be more flexible in rental and incentive negotiation to attract or retain tenants. There are also companies looking for corporate offices in these spaces after relocating their manufacturing operations. Nevertheless, leasing activity may pick up with new supply coming on stream in the later part of the year.