THE recovery in Singapore's trade and manufacturing output has yet to translate into higher demand for industrial space in the first quarter of this year, JTC Corporation's latest figures on industrial property prices and rentals show.
Prices of Singapore's industrial spaces are down 2.2 per cent from the previous quarter; rentals are 0.9 per cent down.
Year on year, the price index is 8.9 per cent lower, and the rental index, 5 per cent lower.
Consultants say there is usually a lag time between economic recovery and demand for industrial space, and point out that the high supply of industrial space in the market is putting pressure on rents.
The occupancy rate is holding fairly steady; it dipped to 89.4 per cent in the quarter, from 89.5 per cent in Q4 2016.
This occurred as 409,000 square metres (sq m) in net new supply outpaced net new demand of 312,000 sq m. The net new demand itself was a sharp 47 per cent drop from 589,000 sq m in Q4 2016.
JLL head of Singapore research and consultancy Tay Huey Ying looked at transaction volume data from URA Realis and saw a similar trend: a 9.2 per cent drop in leasing transactions to 1,826 in Q1 2017, from 2,010 deals in Q4 2016.
She said this reflects industrialists' cost-conscious stance in their real-estate requirements.
For months, Singapore's trade and manufacturing data has been nothing short of robust: In March, non-oil domestic shipments powered to a fifth straight monthly rise, registering a 16.5 per cent increase.
Factory output rose 10.2 per cent year on year, and clocked an eighth straight month of increase, driven by a surge in electronics output.
The Purchasing Managers' Index, a leading indicator of manufacturing activity, logged its seventh straight month of expansion in March; at 51.2, this was its highest reading since November 2014.
But the dissonance between economic data on one hand and industrial prices and rents on the other is caused by continued on-the-ground challenges in the manufacturing sector, coupled with supply-and-demand imbalance, consultants say.
Ms Tay from JLL said that the sustained recovery in trade and manufacturing output could boost optimism among industrialists, although she expects this to be tempered by downside risks such as the prevailing anti-globalisation sentiment, political tension in the region and the uncertainties arising from US President Donald Trump's policies.
Among the sub-segments of the industrial property market, rents for multiple-user factories fell the most at 1.1 per cent; rents for warehouses were the most resilient, with a 0.5 per cent drop.
Rents for business parks fell 1 per cent, supported by a lack of upcoming supply; no major business park completions are due for the rest of this year.
Consultancies' data for business park rents seem to suggest a better performance though.
JLL data shows rents inching up 0.3 per cent quarter-on-quarter in Q1; Cushman & Wakefield's data showed rents for business parks in the central business district fringe rising 2.3 per cent to S$5.81 per square foot (psf) per month. However, rents for business parks in outlying areas dipped by 0.8 per cent to S$3.90 psf per month.
JTC attributed the difference in rental indices to different data sources, and noted that in other areas, the indices show similarities, such as higher rents for business park space on a year-on-year basis.
The general consensus seems to be that the business-park segment will outperform the general market this year, also given the fact that its space tends to be taken up by growth sectors that the government is targeting, predominantly those in the science, technology and media industries.
Going forward for the next three quarters of this year, about two million sq m of industrial space, including 421,000 sq m of multiple-user factory space, is estimated to come onstream.