[SINGAPORE] Buoyant growth in artificial intelligence-related sectors fuelled demand for Singapore industrial space in the third quarter, keeping rents and prices firm even as occupancy dipped.
JTC’s all-industrial rental index rose 0.5 per cent quarter on quarter, continuing an upward streak of rents steadily rising for 24 quarters since the trough in Q3 2020. Q3 rents were 2.1 per cent higher year on year, JTC’s report showed on Thursday (Oct 22).
Prices of industrial real estate also continued to rise, climbing 1 per cent on quarter and 4.2 per cent year on year.
The overall occupancy rate eased 0.2 percentage point from the previous quarter to 88.9 per cent, weighed down by tenants vacating older factories earmarked for redevelopment and weaker demand for suburban business parks.
JLL South-east Asia head of research and consultancy Chua Yang Liang said global demand for semiconductors supported the growth of industrial rents.
“Asia-Pacific economies including South-east Asia countries like Singapore and Malaysia are firmly plugged into this growth driver,” he added.
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“Consequentially, Singapore’s islandwide industrial property market continues to maintain a stable rental growth trend, mirroring the growth rate of the previous quarter.”
Tridiana Ong, head of occupier strategy and solutions at Knight Frank Singapore, indicated advanced estimates showing that Singapore’s economy grew by 5.4 per cent year on year in Q3 2026.
The manufacturing sector expanded by 7.5 per cent, reflecting continued strength in activity, particularly from AI-related industries.
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Still, the quarterly increase in leasing transactions for multi-user factory and warehouse space was “relatively measured”, Ong said.
This suggests that much of the demand stemmed from lease renewals and ongoing space requirements, rather than expansionary moves, she added.
Chua also noted that ongoing geopolitical tensions are starting to weigh on occupier sentiment, with cost-cutting and space optimisation efforts beginning to impact overall occupancy levels, although underlying industrial demand continues to be firm.
Rental growth is likely to remain modest, he said.
He estimated that overall, rents may undergo an upside of 2 to 3 per cent for the full year, given stronger near-term economic performance and continual appetite for premium assets.
Chua also anticipated prices rising 3 to 4 per cent as capital continues to flow into safe havens such as Singapore, driving further marginal yield compression.
Business park rents inched up 0.1 per cent on the quarter, while occupancy slipped 0.7 per cent to 77.2 per cent. Warehouse space recorded 1 per cent quarter-on-quarter growth in rental and an 89.7 per cent occupancy rate for the quarter.
Rents at multiple-user factory spaces, single-user factory spaces, business parks and warehouses recorded a year-on-year uptick of 1.6, 3.1, 0.7 and 2.8 per cent, respectively.
With office rents in the Central Business District remaining significantly higher and prime office supply limited, business parks could offer possible space solutions even though CBD locations remain favoured, noted Ong.
Citing a “good pipeline supply” of new industrial space, JTC said that as at end-September, around 300,000 square metres (sq m) of such space could be completed in Q4.
Between 2027 and 2030, an average annual supply of 1.2 million sq m of industrial space is expected to be completed, of which 59 per cent is single-user factory space with pre-committed demand.
This is slightly higher than an average annual supply of new completions of around one million sq m over the past three years.
In Q3, JTC awarded two tenders, one for a single-user development at 6 Tuas Avenue 14, and another for a multiple-user development at 5 Tuas Avenue 13, with bids received reflecting “strong market interest in multiple-user sites”, it said.
The tender for another single-user development at Jalan Besut was not awarded as the top bid of S$500 per sq m per plot ratio did not cross the reserve price.
Across the market, total investment sales value jumped from an estimated S$1.4 billion to about S$2 billion, driven by a few large-ticket deals alongside sales from newly launched strata industrial developments, said Ong.
While factories with remaining lease tenures of 30 years and below chalked up only a marginal increase in the number of transactions, their total sales value almost tripled quarter on quarter from S$360.7 million to S$972.2 million in Q3, she noted.
“The increasing ticket sizes of some of these shorter-tenure factory assets relative to the broader industrial market underscored investor interest in industrial assets, particularly where value enhancement opportunities and competitive pricing can help offset leasehold constraints,” she added.
In Q3, JTC allocated a total of 80,400 sq m of ready-built facilities (RBF) space to industrialists, which included 31,300 sq m of high-rise space and 44,300 sq m of land-based factory space.
Total RBF returns in Q3 were 105,800 sq m, with about 71 per cent due to natural expiries or companies consolidating their operations, noted JTC.