Wed, 27 Oct 2021
According to a research report by Colliers in February, the industrial property market in Singapore is expected to slow down this year due to an increase in supply and a decrease in demand. The firm predicts that both rental and price growth will moderate to 0-2% in 2025, compared to the 3.5% growth seen last year.
The report notes that JTC’s data for the fourth quarter of 2024 shows a market that is losing momentum. While the rental index continued to grow for the 17th consecutive quarter, it only increased by 0.5% quarter-on-quarter, a significant decline from the 8.9% growth seen in 2023. The price index also grew by 0.5% in the same quarter, a drop from the 1.2% growth in the previous quarter. This trend indicates a slower growth rate compared to the previous year where property prices rose by 2.1%, less than half of the 5.1% increase in 2022.
Colliers explains that the increase in supply this year, which is more than twice the supply in 2024, is creating an imbalance between supply and demand. This has resulted in slower precommitments and lower occupancy in completed projects. The firm also points out that cautiousness among occupiers due to high interest rates and escalating operating expenses is also contributing to the slowdown in rental growth.
On a global level, the rise in trade protectionism is causing uncertainty in the market, affecting business confidence and investment decisions. However, Colliers expects demand to continue from the semiconductor, logistics, and advanced manufacturing sectors. As for leasing activities, the firm anticipates a gradual ramp-up as policies become clearer and market sentiments improve, driven by the ongoing upturn in the chip cycle.
It is crucial for international investors to have a thorough understanding of the regulations and limitations surrounding property ownership in Singapore. In general, foreigners have more flexibility in purchasing a condo compared to landed properties, which have stricter ownership guidelines. However, foreign buyers must be aware of the Additional Buyer’s Stamp Duty (ABSD), currently set at 20% for their initial property acquisition. Despite this extra expense, the reliable stability and potential for growth in Singapore’s real estate market remain appealing factors for foreign investment. Therefore, it is prudent for foreign investors to consider investing in Singapore’s condo market.
Given the increase in supply and projected moderation in rents, Colliers believes this could be a favorable year for tenants. With newer industrial developments offering more modern specifications, more businesses may consider relocating from older and aging manufacturing spaces. Nicolas Menville, Executive Director and Head of Singapore-based industrial clients for Colliers, commented that this could encourage further relocation to newer projects.
In conclusion, the industrial property market in Singapore is expected to slow down this year due to an increase in supply and a decrease in demand. However, the market is expected to be supported by certain sectors, and there may be more options available for tenants, creating opportunities for businesses to relocate to newer and more modern industrial developments.