Singapore industrial leasing volume fell 4.6% year‑on‑year in the second quarter, with the market recording 3,119 deals, according to the latest Savills report.
Transaction count drops amid cautious expansion plans
The decline reflects measured occupier behaviour as businesses remain wary of broader economic signals. Savills said the slowdown was evident across most industrial asset classes, especially single‑user factories and warehouses. Yet overall vacancy rates held steady, suggesting that supply and demand are roughly balanced.
Overall warehouse vacancy stayed at 10.6%, unchanged from the previous quarter. The figure points to a continued preference for newer logistics space, with older stock seeing less interest. Net absorption in the West Region reached 446,000 sq ft, likely buoyed by recently completed logistics facilities.
In contrast, other regions reported weaker performance, pulling the aggregate numbers down. The mixed picture shows how location still matters for tenants seeking efficient supply‑chain solutions.
Vacancy trends show resilience in factory space
The single‑user factory vacancy rate edged down to 10.7% from 10.8% in Q1, marking the lowest level in four years despite fresh supply entering the market. Savills linked this stability partly to the completion of VisionPower Semiconductor Manufacturing Company’s fully owner‑occupied Tampines campus.
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Multiple‑user factory vacancy also improved, falling to 9.5% from 9.8% as steady occupier demand kept pressure off empty space. However, rental trends diverged between segments. JTC’s warehouse rental index rose 0.5% quarter‑on‑quarter, while Savills’ basket of prime warehouse and logistics assets posted a stronger 2.3% increase to S$1.88 per sq ft.
Prime multiple‑user factory rents slipped 1.4% to S$2.24 per sq ft, a two‑year low. The decline reflects tenants’ focus on cost optimisation, prompting softer demand for larger, higher‑specification factories.
These patterns illustrate a market in transition, where efficiency and cost control outweigh the desire for expansive, high‑end facilities. Occupiers appear to be favouring spaces that align with tighter budgets while still offering modern logistics capabilities.
From a broader perspective, the shift toward selective leasing mirrors a global trend where manufacturers recalibrate capacity in response to uncertain demand. As supply chains adapt, the Singapore industrial market’s modest vacancy improvements suggest a cautious but stable environment for investors.
Rental performance remains positive overall, but the gap between asset qualities is widening. While prime warehouse rates continue to climb, the slowdown in multiple‑user factory rents hints at a bifurcated market.
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JTC’s rental index for warehouses rose 0.5% quarter‑on‑quarter, indicating that government‑backed developments retain appeal. Meanwhile, Savills’ data shows that prime warehouse and logistics assets achieved a 2.3% rise, reaching S$1.88 per sq ft.
In the factory segment, JTC’s index recorded a modest 0.6% increase, yet Savills’ prime multiple‑user factory rents fell to a two‑year low. This divergence shows how tenants are prioritising efficiency over sheer size.
Looking ahead, the market’s direction will likely hinge on how quickly business confidence recovers. If occupiers remain cautious, vacancy rates could stay near current levels, and rental growth may stay uneven across asset classes.
For now, the data suggests that Singapore’s industrial property sector is holding its own, with vacancy rates stable and rental indices showing modest gains where demand persists. The next quarter will reveal whether the measured approach continues or if a shift in sentiment sparks renewed activity.
