Singapore prime logistics rents up 3.6% in Q1

Rents are expected to increase by 5% for the full year 2024.

Due to a persistent tight supply situation and resilient demand from third-party logistics (3PL) players, prime logistics rents in Singapore rose by 3.6% qoq in Q1 2024, according to Cushman and Wakefield’s basket of industrial properties.

“A flight to quality continues to characterise the business park and high-tech markets. High-tech properties recorded rental growth of 4.0% qoq, driven by newer and better-located properties,” the report added.

Here’s more from Cushman and Wakefield:

City fringe and suburban business parks saw diverging performance with city fringe business park rents inching up slightly by 0.4% qoq while suburban business parks saw a rental decline of 0.9% qoq. On the other hand, factory and warehouse rents remained flat in Q1 2024.

Leasing activities are expected to pick up in 2024 alongside an improving manufacturing economy. However, the manufacturing recovery remains fragile and moderate rental growth is expected in 2024 due to increasing tenant resistance, still-elevated financing costs and higher supply pipeline for most property types. Many industrial tenants are choosing to renew rather than relocate, highlighting current CapEX constraints amidst a tight financing environment.

With a tight supply situation persisting, prime logistics could witness still-strong but moderating rental growth of 5.0% yoy in 2024 from previous year’s 9.7% growth. Warehouse rental growth is forecasted to ease to 4.0%, on the back of a surge in supply this year. Other assets are expected to see mild rental growth of between 2.0%-3.0% yoy in 2024.

Industrial Investment Interest Remains Steady

On the investment front, interest for industrial properties remains healthy due to their relatively higher yields and favourable long-term prospects. Assets with value-add potential are sought after, particularly for assets which can cater to emerging new economy industries such as self-storage, cold chain and data centers.

For example, a notable industrial transaction in Q1 2024 was BDx’s acquisition of their own data center (OneTen Paya Lebar) for about SGD 140 million, at an estimated net yield of 3.4%. The acquisition allows BDx the flexibility to asset enhance or redevelop the site in line with robust data center demand in Singapore.

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