Higher supply and weaker demand to put downward pressure on industrial property rents: Colliers
Industrial property rates and leas in Singapore are expected to tone down this year amidst higher supply and weak demand, according to a February study record by Colliers. The company is predicting both overall yearly industrial leasing and price growth to moderate to between 0% to 2% in 2025, compared to the 3.5% growth chalked up for both in 2024.
According to Colliers, the source of industrial space is expected to swell this year, with over 2.5 times the supply in 2024 coming on stream before lessening from 2026 onwards. “This surge in supply has resulted in the present supply-demand inequality with sections of the marketplace now seeing upcoming supply with slower precommitments or completed ventures with lower occupancy,” the record states.
The price index likewise grew 0.5% q-o-q in 4Q2024, reducing from the 1.2% growth in the previous quarter. Last year, industrial real estate rates increased 2.1%, less than half of the 5.1% raise recorded the year before.
On the other side, Colliers expects commercial need to continue to be supported by the semiconductors, logistics and advanced manufacturing sectors. It additionally expects industrial leasing ventures to see a progressive ramp-up over time as plans become more clear and market sentiments strengthen, underpinned by the ongoing recuperation in the chip cycle.
The muted expectation happens as JTC’s 4Q2024 data showed a market place that is “slowing”, claims Colliers. The JTC All Industrial rental index charted a 17th consecutive quarter of development in 4Q2024, rising 0.5% q-o-q and bringing total development for the year to 3.5%. However, this notes a substantial decline from the 8.9% rental growth visited 2023.
The higher supply, integrated with increased caution among occupiers because of constantly high interest rates and elevating operating costs, is expected to continue dampening rental increase.
Furthermore, increased trade protectionism has actually brought skepticism right into global markets, potentially affecting service confidence and financial investment decisions.
In the meantime, given the bump in supply and the projected moderation in rents, this might be a good year for lessees with more choices pertaining to market, claims Colliers. “New industrial developments, outfitted with more modern specs, can encourage much more firms to move from older, aging production places to more recent ventures,” claims Nicolas Menville, executive director and head of Singapore-based commercial clients for Colliers.