Rising unfulfilled space requirements

• The supply crunch is contributing to a growing pool of unfulfilled demand.
• Notably, CEVA Logistics has renewed the lease for its existing warehouse space of 31,230 sqm (approximately 336,200 sq ft) at 15 Greenwich Drive for a three-year term with ESR-LOGOS REIT.

Low supply pipeline of new multi-tenanted developments

• There were no new multi-tenanted logistics/warehouse completions in 2Q23, and the near term supply pipeline remains low.
• Landlords continued to explore redevelopment and refurbishment opportunities for their existing developments. During the quarter, ESR-LOGOS REIT unveiled that it has signed a non-binding Heads of Agreement with a master tenant for the proposed redevelopment of 2 Fishery Port Road into a ramp-up modern cold storage facility, with construction expected to start in 4Q23.

Yields hold steady on healthy investor demand

• The persistent supply crunch pushed rents up for the ninth consecutive quarter. This, coupled with healthy investor demand, supported capital value growth, keeping yields of logistics/warehouse assets steady despite the current high interest rate environment. 
• In 2Q23, Hillhouse Capital paid SGD 313.50 million for ESR-LOGOS REIT’s portfolio of five warehouses at 3 Pioneer Sector 3, 21 Changi North Way, 6 Chin Bee Avenue, 4 & 6 Clementi Loop and 30 Toh Guan Road.

Outlook: Rents and capital values to rise, but at a slower pace

• Rents are expected to stay on the uptrend, although escalating headwinds, including the weakening manufacturing output and non-oil domestic exports, could slow growth in the coming quarters.
• Investors are likely to continue to be drawn to the logistics/warehouse asset class due to the positive yield spread over interest rates. Along with the prospect of continued rent growth, this should keep yields steady and support capital value growth.