Singapore business park vacancy rate rises to 16.8% in Q4

Supply still outpaced demand during the quarter.

According to CBRE, business parks in Singapore were resilient despite supply pressures weighing on the market. A positive net absorption of 0.31 mil sq. ft. was recorded in Q4 2022, but demand was unable to keep up with net supply as the completion of Perennial Business City added approximately 1.00 mil sq. ft. to the market. 

“As a result, islandwide vacancy inched up to 16.8% in Q4 2022 from 14.2% in Q3 2022. 2022’s full year net absorption stood at 0.49 mil sq. ft., 20.8% lower than the net absorption of 0.62 mil sq. ft. in 2021,” the firm said in a report.

Here’s more from CBRE:

Leasing demand has been mainly focused on newly completed projects such as Perennial Business City and Cleantech Three. With vacancies in City Fringe reaching a historical low of 3.4%, leasing activities in the submarket continued to be capped. 

This resulted in some spillover demand to the Rest of Island submarket, such as in the Changi Business Park and International Business Park micromarkets. With slowing demand from the tech sector, demand was mainly boosted by the pharmaceutical and biomedical sectors. 

Rest of Island submarket registered its first rental increase 

Tight availability continued to drive business park rents in the City Fringe, which increased 0.8% q-o-q to $6.10 psf/month. Meanwhile, rents in Rest of Island registered its first increase of 1.4% q-o-q to $3.65 psf/month since 2018, as it played catch-up with City Fringe rents, on the back of better leasing demand. 

Supply risk is here to stay 

Moving forward, occupancies are expected to be weighed down by the introduction of significant new supply coming onstream. There is about 3.22 mil sq. ft. of completions in 2023- 2024, accounting for 15% of current business park stock. Of this, about 90% is located in Rest of Island. 

Going into 2023, leasing demand could be weighed down by macroeconomic headwinds and a slowdown in the tech sector. However, this is expected to be temporary as the long-term growth prospects for business parks remain strong.