MANUFACTURING PERFORMANCE

In the first quarter of 2024, manufacturing sentiment in Singapore improved despite weak external demand and ongoing geopolitical tensions, resulting in further expansion of overall factory activity.

Based on data from the Singapore Institute of Purchasing and Materials Management (SIPMM), the Purchasing Managers’ Index (PMI) rose by 0.1 points month-on-month to 50.7 (Chart 1).

A reading below 50 indicates that the manufacturing sector is declining, while a reading above 50 signifies growth.

PRICE TREND

Last quarter, overall industrial prices fell for the first time after 13 consecutive quarters of growth as interest rates remained higher for longer. As borrowing conditions are expected to improve from the second half of this year, many investors may wait until the end of the year to purchase new industrial properties that are of better quality.

 According to JTC’s quarterly market report, the overall price index fell by 0.2 per cent quarter-on-quarter (q-o-q) to 102.7 in Q1 2024 from 102.9 in Q4 2023 (Chart 2).

By property types, a slower price growth of 0.5 per cent q-o-q was observed for multiple-user factories last quarter, while prices declined for a second consecutive quarter by 1 per cent q-o-q for single-user factories.

SALES VOLUME 

High borrowing costs slowed industrial sales last quarter, just like the observed trend for industrial prices. Industrial sales dipped for a third consecutive quarter by 15 per cent q-o-q to 364 units in Q1 2024 from 428 units in Q4 2023 (Chart 3). The sales decline was led by warehouse resales, which dipped by 58 per cent from 50 to 21 units over the same period.

Single-user factory and multiple-user factory resales also fell by 22.2 per cent from 18 units to 14 units and by 8.6 per cent from 360 units to 329 units, respectively. The upcoming food factories in the West region, Food Ascent and Food Vision @ Mandai, sold 23 new units in total last quarter.

In Q1 2024, the total industrial sales marginally improved by 5.6 per cent q-o-q to $741.7 million from $702.7 million in Q4 2023. The top contributor came from the sale of the former data-centre in the central region, OneTen Paya Lebar, for $140 million. A total of three sales were above $50 million last quarter.

RENTAL TRENDS 

Due to high-interest rates, many investors are optimizing their living spaces or moving to smaller units. They are waiting for better borrowing conditions and improved quality of new developments before committing to longer leases.

Consequently, fewer rental transactions were recorded. Rental volume dipped 6.5 per cent to 2,948 units in Q1 2024 from 3,153 units in the previous quarter.

The rental volume for multiple-user factories, single-user factories, business parks and warehouses fell by 5.9 per cent, 8.3 per cent, 1.2 per cent and 9.4 per cent, respectively.  

With the development of new industrial properties and renovation of existing industrial spaces, landlords face higher operating costs which has led to an increase in rent prices.

 JTC statistics show that the overall industrial rental index rose by 1.7 per cent q-o-q from 106.4 in Q4 2023 to 108.2 in Q1 2024 (Chart 5).

Rents picked up pace at 2.1 per cent, 2.1 per cent and 2 per cent for single-user factories, business parks and warehouses respectively. Conversely, multiple-user factory rents experienced a slower growth of 1.3 per cent q-o-q, down from 2.3 per cent in Q4 2023.

STOCK AND OCCUPANCY  

In the first quarter of 2024, there was a significant increase in the number of new industrial property completions, with slightly over 126,000 sqm of available space added to the market. This figure is nearly double the additions in the preceding quarter.

Over the same period, despite the increase in industrial supply, there was a decrease in the uptake of industrial spaces by more than 19,000 sqm.

As a result, the overall occupancy rate experienced a marginal decline of 0.3 percentage points, dropping to 88.7 per cent in Q1 2024 from 89 per cent in Q4 2023.

Over the same period, the occupancy rates for single-user factories, business parks and warehouses similarly fell from 88 per cent to 87.8 per cent, 78.4 per cent to 78 per cent, and 91.6 per cent to 91.1 per cent, respectively.

The occupancy rate for multiple-user factories, however, remained steady at 90.5 per cent.