Industrial Leasing Transactions 58 Q O Q 3Q2024 Knight Frank
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October 8, 2024: Industrial property leasing activity showed growth in the third quarter of 2024, driven by a rebound in the manufacturing sector. According to Knight Frank Singapore’s quarterly industrial and logistics report, there were 3,304 leases recorded, representing a 5.8% increase from the previous quarter. This also contributed to a 1.6% rise in the total value of rental transactions, reaching $29.1 million for the quarter. On a year-on-year basis, leasing activity saw a growth of 2.3% in 2023’s third quarter.The expansion in leasing activity was supported by a 9.9% increase in Singapore’s manufacturing sector during the same period, based on advanced estimates by the Ministry of Trade and Industry. All manufacturing sectors saw an increase in output except for biomedical manufacturing, further boosting the demand for industrial properties. In August, the Economic Development Board reported a 27.5% surge in Singapore’s total manufacturing output, excluding biomedical manufacturing. This was driven by a 49.1% increase in the electronics cluster, attributed to a low semiconductor production base last year and a higher demand for electronics.Compared to the previous quarter, rents for industrial properties across the island saw an increase of 0.8% and 0.9% in the 25th percentile and median categories respectively. However, rent in the 75th percentile declined by 3.6%. On the other hand, all percentiles for single-use factory spaces saw an increase in rent, with the 75th percentile experiencing the biggest growth at 11% to $2.47 psf pm. This was followed by the 25th percentile at 2% to $1.55 psf pm and the median category at 0.6% to $1.80 psf pm.Besides the rebound in the manufacturing sector, the anticipation of an interest rate cut by the US Federal Reserve also contributed to a positive outlook, boosting industrial sales activity. In the third quarter of 2024, Knight Frank’s report shows that industrial property sales saw a significant increase of 199.6% to $3.1 billion in 456 deals. Year-on-year, the sales value rose by 206%. One of the major deals that contributed to this surge was the sale of a portfolio comprising of seven industrial properties owned by Blackstone and Soilbuild Group to a joint venture between Lendlease and private equity group Warburg Pincus. This transaction was valued at $1.6 billion.Other notable transactions in August include ESR LOGOS REIT’s purchase of a 51% stake in an industrial building at 20 Tuas South Avenue 14 for $444.6 million, and Ho Bee Land’s sale of a 49% stake in Buona Vista’s biomedical sciences development, Elementum, to a Brunei sovereign wealth fund for $272 million.Looking ahead, Calvin Yeo, head of occupier strategy and solutions at Knight Frank Singapore, predicts that the industrial real estate market will continue to strengthen. He expects industrial transaction volume to gain momentum, driven by sales of multiple-user factory spaces and warehouses. With the expectation of a more favorable borrowing environment, individual buyers purchasing for business use and private equity funds acquiring assets for investment are expected to make their move. Yeo also believes that industrial property rents and prices will remain stable for the rest of the year, with the potential for more growth in 2025.