Q2 2024 Industrial Statistics from JTC

The manufacturing sector appears to have turned a corner in Q2 2024, expanding 0.5% y-o-y and 0.6% q-o-q after a contraction of 1.7% y-o-y and 5.3% q-o-q in the first three months of the year, based on advanced estimates from the Ministry of Trade and Industry (MTI). As the manufacturing sector shifts from a difficult 2023 to one of more optimism in 2024, the industrial real estate sector has been and continues to be characterised by consistent stability and resilience.

In Q2 2024, the all-industrial price index increased 1.2% q-o-q. There was an increase in industrial property sales activity in Q2 2024 with 509 transactions that amounted to a total sales value of about S$949.6 million (based on data available as at 16 July 2024), representing a quarterly rise of 34.7% and 25.1% respectively. The several large industrial deals that boosted sales activity during the quarter included the sale of BHL Factories at 2C Mandai Estate for S$74.0 million in May, Kian Ann Building at 7 Changi South Lane for S$63.0 million in June, and a single-user factory located at 47 Pandan Road that was sold for S$36.0 million in April.  

With international manufacturers continuing to see Singapore as a potential location to expand manufacturing operations, demand for industrial properties will be supported, potentially increasing sales activity further when interest rates are cut.

At the same time, the all-industrial rental index expanded by 1.0% q-o-q as the overall occupancy rate also improved by a slight increase of 0.3 percentage points (pp) from 88.7% in Q1 2024 to 89.0% in Q2 2024. Multiple-user factories recorded an increase of 0.8 pp q-o-q to 91.3%, single-user factories inched up 0.2 pp q-o-q to 88.0% and even business parks rose 0.3 pp q-o-q to 78.3%. Certain business park space, especially those that are not in central locations, had come under vacancy pressures as occupiers reduced their requirements.

Demand for business park spaces remained tentative. Qualifying office occupiers continued 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 enjoy higher occupancies and command higher rents, but rents for older business parks located in the east or west of Singapore have come under pressure. The warehouse occupancy rate improved 0.2 pp to 91.3% q-o-q in Q2 2024, with interest for cold storage space observed to be on the increase.

Singapore continues to attract international firms looking to establish a secure base of operations or to expand, drawn by a skilled workforce and strategic location in the Southeast Asian market. For example, Aerospace company Collins Aerospace just announced the relocation of its existing facility in Bedok to a new US$250 million site at Seletar Aerospace Park, expected to be operational in 2028. AstraZeneca, a British-Swedish pharmaceutical giant was reported to inject a greenfield investment of S$2 billion to build a manufacturing facility for antibody drug conjugates that is expected to be operational from 2029. Additionally, pharmaceutical manufacturer Pfizer just opened a S$1 billion 429,000-sf extension on 23 July to produce active pharmaceutical ingredients for medicines.

As such, key industrial metrics such as prices, rents, and occupancy levels are expected to be stable across most industrial types. With GDP, manufacturing output, and PMI pointing towards a more positive outlook in the second half of 2024, overall factory rents and prices are likely to maintain for the remainder of the year with a slight growth of between 3% to 5% for the whole of 2024.