According to a research report by Colliers released in February, the industrial property market in Singapore is expected to experience a slowdown this year due to a combination of higher supply and weaker demand. The firm projects a moderate rental and price growth of 0% to 2% annually in 2025, compared to 3.5% growth seen in both areas last year.
Colliers notes that JTC’s fourth quarter data for 2024 indicates a market that is “losing steam”. The rental index for all industrial properties saw a 17th consecutive quarter of growth in the fourth quarter of 2024, with a 0.5% quarter-on-quarter increase, bringing the total growth for the year to 3.5%. However, this is a significant decrease from the 8.9% growth seen in 2023. The price index also grew by 0.5% quarter-on-quarter, a decline from the 1.2% growth in the previous quarter. Industrial property prices rose by 2.1% in 2024, less than half of the 5.1% increase seen in 2023.
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Colliers attributes the muted outlook to the expected surge in industrial space supply this year, which is more than 2.5 times the supply in 2024. The report states, “This surge in supply has led to the present supply-demand imbalance with segments of the market now seeing upcoming supply with slower precommitments or completed projects with lower occupancy.”
This increase in supply, along with higher interest rates and operating expenses, is expected to continue dampening rental growth. Moreover, the uncertainty brought about by heightened trade protectionism may also affect business confidence and investment decisions.
On the other hand, Colliers expects industrial demand to remain strong, supported by sectors such as semiconductors, logistics, and advanced manufacturing. The firm also predicts a gradual ramp-up in industrial leasing activities as policies become clearer and market sentiments improve, driven by the ongoing upturn in the chip cycle.
However, with the projected moderation in rents and the increase in supply, tenants will have more options in the market this year, according to Colliers. New industrial developments with modern specifications may encourage businesses to relocate from older, aging manufacturing spaces to newer projects, says Nicolas Menville, executive director and head of Singapore-based industrial clients for Colliers.
In summary, the industrial property market in Singapore is expected to see a slowdown in rental and price growth this year, primarily due to the rise in supply and weaker demand. However, demand from key sectors may continue to support the market, and the increase in supply may provide tenants with more options in the market.