Higher supply and weaker demand to put downward pressure on industrial property rents: Colliers

According to Colliers, the supply of commercial sector is expected to expand this year, with over 2.5 times the supply in 2024 coming on stream before lessening from 2026 onwards. “This upsurge in supply has actually led to today supply-demand imbalance with sectors of the market now seeing upcoming supply with slower precommitments or completed projects with reduced tenancy,” the record states.

In the meantime, provided the bump in supply and the projected restraint in rental fees, this might be a good year for occupants with even more options concerning market, says Colliers. “New commercial developments, furnished with more modern requirements, might motivate a lot more businesses to move from older, ageing manufacturing places to newer projects,” says Nicolas Menville, executive director and head of Singapore-based industrial customers for Colliers.

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On the other side, Colliers prepares for commercial need to continue to be supported by the semiconductors, logistics and advanced manufacturing fields. It also expects industrial leasing ventures to see a gradual ramp-up in time as plans end up being more clear and market views improve, underpinned by the continuous upturn in the chip cycle.

In addition, enhanced trade protectionism has brought uncertainty right into worldwide markets, potentially influencing organization confidence and financial investment choices.

Industrial property prices and rental fees in Singapore are anticipated to tone down this year amid a lot higher supply and weaker necessity, according to a February study report by Colliers. The company is projecting both general annual industrial leasing and price buildup to moderate to in between 0% to 2% in 2025, contrasted to the 3.5% increase chalked up for both last year.

The consumer price index likewise increased 0.5% q-o-q in 4Q2024, reducing from the 1.2% development in the previous quarter. Last year, industrial real estate rates climbed 2.1%, even less than half of the 5.1% increase reported the year before.

The soft outlook comes as JTC’s 4Q2024 data indicated a market that is “losing steam”, 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 progress for the year to 3.5%. However, this marks a considerable decrease from the 8.9% rental growth logged in 2023.

The greater supply, integrated with enhanced caution among occupants because of constantly high interest rates and rising operating budget, is anticipated to proceed dampening rental increase.