Savills Research shared that strata industrial sales volume hit a five-year low at 351 transactions in Q1. This could be due to investor sentiments being affected by reconfiguring supply chains and rising business costs, resulting in a deferment in expansion plans.

Sales volume fell at a slower rate at 3.8% quarter-on-quarter (QoQ) in the first quarter, compared with -20.1% QoQ in Q4/2024. Notwithstanding the lacklustre sales momentum, JTC multiple-user factory price index continued to increase, up 1.9% QoQ in Q1.

Savills also noted that its basket of 30- and 60-year leasehold property prices posted stronger growth in Q1, rising 3.3% and 1.2% QoQ respectively. This could mean that buyers favour assets with a more palatable bite size and financial quantum during this period of economic uncertainty. Consequently, there is more room for price negotiation. On the other hand, prices for freehold properties fell by 0.7% QoQ in Q1.

In the rental market, the factory and warehouse segments saw stable leasing momentum in Q1, with total leasing volume increasing marginally by 1.3% year-on-year (YoY). Considering the challenging business climate, overall demand showed some signs of softening as occupiers are adopting a wait-and-see attitude. Businesses are delaying their leasing decisions and reevaluating their space requirements. In the reviewed quarter, warehouse logistics is the most active segment with 6.1% more tenancies from a year ago. While multiple-user factory recorded a steady demand in Q1 (+1.7% YoY), single-user factory demand continued to soften (-16% YoY).

Moving forward, lease renewals are likely to continue to form the main bulk of industrial space demand as landlords continue with generous incentives to retain tenants, especially for the older and less prime buildings. Coupled with the limited pipeline supply for factory spaces this year, multiple-user factory rents are projected to continue rising at the same pace of up to 3% this year.

Despite the surge in upcoming warehouse supply this year, occupancy is expected to stabilise after a while as a big bulk of the new prime logistics spaces have been pre-committed. Likewise for the business park segment, it will take a while for the fully completed Punggol Digital District to be absorbed, hence exerting pressure on the occupancy rate in the near term. Although the new facilities generally command higher rents, the overall warehouse and business park rents are likely to stay rather flat as the older developments remain as a potential drag on rental growth, offsetting the higher rents from newer real estate. ( see Table 1 below )

Click here to view Table 1: Rental Forecast For Multiple-User Factory And Warehouse & Logistics Segments

Ashley Swan, Executive Director, Commercial & Industrial, Savills Singapore says, “The Singapore industrial market remained fairly resilient in the face of continued economic uncertainty and the added challenge of navigating the US tariff situation. Companies are rightfully cautious throughout the different sectors as they adopt a more “wait and see” approach rather than commit to expansion at this juncture. We expect that this vigilant approach will remain the overriding theme for the rest of the year which is reflected in our rental forecast for the full year.”

Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore comments, “The imposition of tariffs on all nations by the US in April, has inevitably raised the level of economic uncertainties sharply. This has stymied corporate decision making, slowed the velocity of transactions and thus tampered the global economic outlook. Notably, the manufacturing sector is likely to be affected by subdued global demand. Industrial assets could face spillover drag from tariffs if trade starts to slow down.

The uncertain economic backdrop will likely dampen business’ expansion plans and spending, hence affecting the overall demand for industrial space. For industrial and warehousing properties that had been underwritten by long lease terms signed in the past year, the impact of these economic uncertainties is muted. Singapore’s relatively low level of tariffs of 10% may not have too much of a deleterious impact on rents for industrial properties in Singapore.”