APPD Market Report Article

Singapore

November 29, 2022

Doreen Goh, Director - Research, Singapore

7.9%

SGD 1.50

Rents
Rising

Third-party logistics players are a key demand driver in 3Q22

  • Demand for logistics/warehouse space stayed healthy in 3Q22, driven mainly by third-party logistics players with expansion needs. There were also enquiries for temperature-controlled premises. On the other hand, new requirements from e-commerce firms have slowed down.
  • The tight space availability, especially for larger spaces of 100,000 sq ft and above, is prompting more occupiers to consider renewing their existing leases.

Redevelopment projects to inject new quality stock

  • The first phase of the LOGOS Tuas Logistics Hub was fully completed in 3Q22.
  • Some landlords have embarked on redevelopment plans for their ageing assets, which will inject new quality stock into the supply pipeline in the coming years. For example, Mapletree Logistics Trust is redeveloping 51 Benoi Road into a new six-storey ramp-up warehouse by 2025.

Rents record fastest quarterly rise since trending up in 2Q21

  • Healthy demand amid tight supply, especially for quality logistics/warehouse space, drove the average islandwide logistics/warehouse rent up for the sixth consecutive quarter in 3Q22. This has brought rents back to its previous peak in 4Q13.
  • Investors and end-users continue to buy logistics/warehouse properties. Pandan Logistics Hub was sold by ESR-LOGOS REIT to ST Logistics for SGD 43.50 million, while CapitaLand Ascendas REIT announced the acquisition of 1 Buroh Lane, a five-storey ramp-up logistics facility with a range of chiller, freezer, airconditioned and ambient storage spaces, from A3 Lux Alpha S.a.r.l for SGD 191.90 million.

Outlook: Further upside potential for rents and capital values

  • The tight availability for quality logistics/warehouse spaces is expected to extend into 2023 and underpin further rent and capital value growth. Given 3Q22’s outperformance, growth forecasts for 2022 and 2023 have been upgraded.
  • Notwithstanding the upgrades, the rent increase is expected to moderate in anticipation of occupiers’ resistance amid a more challenging macroeconomic environment in 2023. Soaring interest rates could also slow the strength of capital value growth in 2023.

Note: Singapore Logistics & Industrial refers to Singapore's islandwide logistics/warehouse market.

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