Industrial leasing transactions fall 4.6% year-on-year despite 12.5% growth in manufacturing output
SavillsSingapore shares that strong manufacturing growth has yet to translate into broader industrial occupier demand, with leasing activity continuing to moderate in Q2/2026 as occupiers remained cautious amid economic uncertainty and a slower pace of expansion.
According to advance estimates from the Ministry of Trade and Industry (MTI), Singapore's economy expanded by 5.9% year-on-year (YoY) in Q2/2026, down from the 6.3% growth recorded in Q1/2026. Despite the moderation in overall GDP growth, the manufacturing sector expanded by 12.5% YoY, up from 7.3% in the previous quarter, supported by robust artificial intelligence (AI)-related demand for semiconductors and semiconductor manufacturing equipment.
However, industrial leasing volume declined 4.6% YoY in Q2/2026. Amid cautious business sentiment, occupiers remained measured in their expansion plans, resulting in softer demand across most industrial asset classes, particularly the single-user factory and warehouse segments.
The cautious leasing environment is contributing to increasingly differentiated performance across Singapore's industrial market, with demand continuing to favour modern, well-connected and higher-quality space.
Savills' basket of prime warehouse and logistics assets recorded rental growth of 2.3% quarter-on-quarter (QoQ), supported by sustained demand for modern, well-connected logistics facilities. In contrast, Savills' prime multiple-user factory rents declined 1.4% QoQ to a two-year low, reflecting increasingly selective occupier demand and greater emphasis on efficiency and cost optimisation.
A similar trend was evident across the business park and high-specification industrial segments. Savills' standard business park rents declined 0.8% QoQ, compared with a smaller 0.2% decline for prime business park rents, while high-specification industrial rents rebounded 0.6% QoQ after three consecutive quarters of decline. Steady demand for newer and better-equipped facilities continued to reinforce the performance gap between modern assets and older industrial stock.
Ashley Swan, Executive Director, Commercial & Industrial, Savills Singapore, said: “The divergence in rental performance reflects an increasingly selective occupier market. Demand remains stronger for modern logistics and higher-quality industrial space, particularly where properties offer the efficiency, connectivity and specifications occupiers require. As businesses remain cost-conscious, we expect this differentiation in rental performance between asset types and quality to continue.”
The same selectivity is evident in the industrial sales market. Strata industrial sales rebounded 19.7% QoQ to 437 deals in Q2, reversing two consecutive quarters of decline. Despite the pickup in transaction activity, buyers remained highly selective and price sensitive, with demand continuing to concentrate on well-located assets with stronger remaining lease tenures.
Savills' basket of strata industrial properties showed the continued divergence by tenure profile. Values of 30-year leasehold industrial assets declined a further 1.9% QoQ, while prices of 60-year leasehold properties edged up 0.3%. Freehold industrial assets continued to outperform, rising 1.6% QoQ. The widening price gap underscores investors' continued preference for tenure security and asset preservation amid an uncertain economic environment.
Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore, said: “While rents continue to trend upwards, the decline in leasing transactions on a year-on-year basis could point to latent undercurrents of weakness in the industrial occupier market. In light of heightened market volatility and softer leasing momentum in the first half of the year, we expect multiple-user factory rents to remain flat in 2026, while warehouse and logistics rents are projected to grow by approximately 1%, supported by continued demand for modern logistics space but tempered by a more cautious pace of occupier expansion.”
TABLE 1: Savills Rental Forecast For Multiple-User Factory And Warehouse & Logistics Segments