Overall industrial rents rose by 1.0% qoq for the 15th consecutive quarter in Q2 2024, moderating from previous quarter’s 1.7% qoq growth. In H1 2024, overall industrial rents grew 2.7% YTD, compared to 4.9% YTD over the same corresponding period last year. Due to growing business cost concerns and higher tenant resistance, overall industrial rents are starting to ease. Supported by resilient demand, multiple-user factory and single-user factory recorded the strongest rental growth of 1.5% qoq and 1.3% qoq respectively, followed by warehouses (+0.5% qoq). On the other hand, rents of business parks are facing pressure due to hybrid work and space optimization, resulting in a rental decline of 0.1% qoq.
The business park market remains a two-tier market, with city fringe business parks enjoying higher rents and occupancy compared to suburban business parks. Within the suburban business parks, newer suburban business parks enjoy higher occupancy rates and can command higher rents, while older suburban business parks may lag behind. Due to a slowdown in demand and higher new supply, suburban business parks may see moderate or flattish rental growth. Given their good locational attributes, city-fringe business park rents are expected to trend higher by 0-2% in 2024, and this may encourage some companies to consider cost-effective alternatives in suburban business parks, as the gap in rents widen.
Overall industrial vacancy rate tightened by 0.3% points to 11.0%, as net demand outweighed net supply. All property types saw declines in vacancy rates, out of which multiple-user factory saw the steepest fall in vacancy rate by 0.8% points to 8.7%, the lowest level since Q1 2012. Driven by single-user factory and multiple-user factory, overall net demand recovered to +2.8 msf in Q2 2024, compared to -206K sf in Q1 2024, which signals an improvement in overall demand for space. Demand for factory spaces is expected to pick up alongside the improving external demand situation. Also, Singapore remains an attractive manufacturing hub and continues to draw global manufacturers to set up or expand their operations here, with recent commitments announced by firms in the biomedical and advanced manufacturing sectors.
Overall industrial prices rebounded by 1.2% qoq in Q2 2024, compared to a 0.2% qoq fall in the previous quarter. Industrial volumes (based on caveats lodged) rose by 44.4% qoq or 18.7% yoy to 546 transactions in Q2 2024. Industrial investment sales are expected to remain supported by strong investor interest due to their positive yield spreads above the current elevated interest rates, capital recycling activities and new economy demand.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), sustainability and more. For additional information, visit www.cushmanwakefield.com.
