Q4 2023 Industrial Statistics from JTC

With manufacturing in the doldrums for much of 2023, industrial real estate was consistently stable. In Q4 2023, the all-industrial price index increased 0.6% q-o-q, while the rental index expanded by 1.7% q-o-q. For the whole of 2023, industrial property prices increased 5.1%, and rents have grown 8.9%, despite the manufacturing sector contracting in the first three quarters of 2023 and 3.6% for the whole year (based on advance estimates). Both the all-industrial price and rental indices have risen for 13 consecutive quarters now, since Q4 2020, even though GDP for the manufacturing sector contracted by 5.2% y-o-y in Q1 2023, 7.5% y-o-y in Q2 2023 and 4.7% y-o-y in Q3 2023, only to clock early signs of recovery in Q4 2023 with a turnaround and growth of 3.2% y-o-y.  

The overall occupancy rate was also stable with a slight increase of 0.1 percentage points (pp) from 88.9% in Q3 2023 to 89.0% in Q4 2023. However, this was a 0.4 percentage point (pp) drop from 89.4% at end-2022. While multiple-user factories recorded a slight increase of 0.8 pp q-o-q to 90.5% in Q4 2023, single-user factories and business parks recorded declines during the quarter. The warehouse occupancy rate improved 0.3 pp to 91.6% q-o-q in Q4 2023, as healthy demand for quality warehouse and logistics facilities persisted throughout 2023. The upcoming warehouse supply of about 4.2 million sf (gross floor area) in 2024 should bring about some balance against the demand pressures for quality logistics facilities in the year ahead.

The occupancy rate for business parks decreased to 78.4% in Q4 2023 after five consecutive quarters of declines, even though the rental index for this property type increased 0.3% q-o-q and 3.4% y-o-y. Demand for business park spaces has weakened. Qualifying office occupiers choose to renew leases instead of incurring capital expenditure to relocate to decentralised business parks, notwithstanding the savings in occupational costs. Existing business park tenants have also been cost consciously reducing their footprints, requiring less space with the adoption of hybrid work arrangements. Business park spaces that have immediate connectivity to MRT stations and are centrally located typically commanded higher rents, but rents for older business parks located in the east or west of Singapore likely plateaued in 2023.

After staying in a holding pattern through most of 2023 where key indicators such as occupancy levels, prices, and rents for most industrial property types generally remained steady, occasionally even recording slight gains, manufacturing output and GDP contribution began to show signs of growth towards the end of the year. And although challenges, such as the attacks on commercial shipping in the Gulf of Aden, an escalation of military conflict in the Middle East, a more optimistic outlook for manufacturing in 2024 can be expected. Large international manufacturers such as semi-conductor producers that had invested in new facilities or expansion spaces during the winter of discontent in H2 2022 and 2023, prepare to begin operations in order to catch the wind of global rebound in the year ahead.

With the relatively positive outlook at the closure of a quiet 2023, the overall industrial rental and price growth for 2024 is projected to be 3% to 5%. A more optimistic increase of 5% is likely for warehouses as demand remains intact for high quality storage spaces amid tight occupancy levels. Rents for business park space that are well-located could grow marginally 1% to 3% in 2024. However, rents for older business parks in non-central areas could flatten out, hovering at the lower end of the forecast range.