Singapore multiple-user factories’ vacancy rates hit 9-year low in Q1

Vacancies of multiple-user factory spaces in the Central Region fell to 9% during the quarter.

Singapore saw industrial quarterly leasing volume increase to 3,054 transactions in the first quarter of 2022. However, Savills notes that the pace of growth slowed to 3.5% YoY. 

While the single-user factory segment remained the key demand driver of the industrial rental market, the YoY growth in tenancies signed moderated from 63.0% in Q4/2021 to 39.7% in Q1/2022. The multiple-user factory and warehouse segments continued to see steady take-up from digital and creative firms, as well as e-commerce and third-party logistics (3PL) companies. 

Here’s more from Savills:

As most small and medium-sized enterprises (SMEs) generally prefer prime locations, the vacancy rate for multiple-user factory spaces in the Central Region fell to its lowest level (9.0%) of the last nine years. Despite the increase in overall occupier demand (+724,000 sq ft) in Q1/2022, the island-wide vacancy for multiple-user factory spaces of 11.2% has not been higher since Q4/2020. 

This was largely due to the addition of new supply from the partial completion of JTC Defu Industrial City. Meanwhile, the vacancy rate for single-user factories and warehouses remained relatively firm in Q1/2022, inching up to 9.6% (+0.2% ppt QoQ) and 9.7% (+0.3 ppt QoQ) respectively. 

Compared with the previous quarter, rents continued to increase across all industrial segments in Q1/2022. The JTC’s rental index for factory hit a post-2017 record and the Savills’ average monthly rent for prime multiple-user factories increased by 3.6% QoQ to S$1.90 per sq ft in Q1/2022. 

Although the JTC’s rental index for warehouses rose, the Savills’ average monthly rent for prime warehouses and logistics properties recorded a marginal decline of 0.7% QoQ to S$1.45 per sq ft in Q1/2022. While landlords of modern warehouse facilities are still holding up their rental expectations, the overall rental decline was largely due to the decrease in rents in some of the strata-titled warehouse properties in our basket. 

Sales market

Strata industrial sales activity fell 8% from 460 transactions in Q1/2021 to 423 transactions in Q1/2022. Notwithstanding the decline in sales, this is still well above the historical five-year average sales (279 caveats). The steady sales momentum was likely backed by local SMEs which acquired multiple-user factory and warehouse properties for their own business operations, especially those in the electronics, manufacturing, biomedical, healthcare, e-commerce, and last mile transportation services. 

Savills’ basket of industrial properties showed that prices for freehold properties increased by 1.1% QoQ to S$729 per sq ft while that of 60-year leasehold units rose by 0.9% QoQ to S$447 per sq ft in Q1/2022. From Savills’ basket of industrial properties, 30- year leasehold industrial properties increased by a faster pace at 3.5% QoQ to S$305 per sq ft in Q4, ending six consecutive years of year-on-year price declines. The overall price growth could be backed by ample liquidity in the market.