SINGAPORE (EDGEPROP) – The Singapore industrial is a picture of stability with cautious optimism ahead for 2019, said a JLL commentary on the JTC All Industrial Rental Index in Q1 2019. The report said that the Singapore industrial property market starting the year on a positive note as net absorption of industrial space improved quarter-on-quarter and year-on-year.

Tay Huey Ying, JLL’s Head of Research and Consultancy for Singapore commenting on the Singapore industrial scene said: “except for the multi-user factory segment, all other industrial segments tracked by the JTC posted improvement in net absorption in 1Q19.”

“This, coupled with the slowdown in new completions in 2018 and the relatively low net space addition in 1Q19, had allowed demand to play catch up. Consequently, the island-wide all-industrial occupancy rate held stable at 4Q18’s level of 89.3%.

“Against this backdrop, the all-industrial property rental index was unchanged for the second consecutive quarter, while the all-industrial property price index (which tracks price movements of single-user and multi-user factories) remained relatively stable for the fifth successive quarter.

“This has affirmed JLL’s earlier observation that the Singapore industrial property market has bottomed.”

JLL said in its commentary that it was cautiously optimistic that the Singapore industrial property market will hold firm in 2019.

“Although 2019’s supply could more than double from 2018’s net addition of around 545,000 sqm going by JTC 1Q19’s statistics, more than two-thirds of 2019’s pipeline supply is expected to be from single-user factory developments meant predominantly for owner-occupier purposes.

“Occupier demand, on the other hand, should remain healthy although the ongoing macro-economic challenges including the widely-anticipated slowdown in manufacturing output growth in 2019 and the lingering global trade crisis could put businesses on a cautious mode and curb expansion plans.

“Industrial developments with higher building specifications catering to the needs of new economy firms (e.g. technology companies) and firms from higher value-added industries should remain sought after.”

JLL, in particular, expects the business park segment to outperform the rest of the market. It said that with Ascent 5 already fully leased and with no other multiple-user facility completing for the rest of the year, the availability of quality business park space for lease is expected to be tight in 2019.

This should underpin a faster pace of rental growth for Singapore industrial property market in 2019, possibly by up to 5%, barring any unforeseen external shocks, said JLL.

JLL’s commentary on the Singapore industrial comes at a time when the industrial property market is steadily improving in health. This improvement in the industrial property market comes at the back of a strong pick-up in leasing transactions to a record high. This has likely been underpinned by the more upbeat business sentiment alongside the positive economic and manufacturing data, which has emboldened more tenants and industrialists to review their real estate options.

Leading real estate observers have said that they were optimistic that the industrial property market will likely bottom within the next 12 months, barring any unforeseen external shocks. They took into account the tapering pipeline supply that will allow demand to play catch up amid the positive economic outlook, barring any unforeseen external shocks.

Researchers noted in recent months that industrial rents stagnated during 2018 due to the supply overhang from the preceding years. It believes that in 2019, the tapering of supply will lend support to the market and lead to marginal increases in rents despite the slowdown in manufacturing growth.

One research said that factory rents could see an increase of 0.5%, while warehouse rents may rise by 1.0% as demand for warehouses has picked up due to rising competition in the e-commerce space. It added that business park demand will be sustained by cost-conscious companies who do not need to be in the CBD. Rents for business parks in the city fringe are projected to rise by 2.0%, while rents for business parks in outlying areas are expected to increase by a smaller 0.5%.

There are already signs of an uplift in economic and manufacturing sector performances, which may point to an imminent bottoming of the industrial property market.

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