Industrial property rental index expands modestly in 4Q24

Dr Chua Yang Liang, Head of Research & Consultancy, Southeast Asia commented:

The latest modest growth of 0.5 per cent q-q (3.5 per cent y-y) in the JTC rental index (All Industrial) is not surprising, given the general deceleration recorded in the composite as well as component indices since 2023.

The JTC rental index (All Industrial) has been slowing since the end of 2023 - both on a quarterly and yearly basis, suggesting that the deceleration is no longer transitionary but structurally embodied in the market. Compared to the 0.3 per cent q-q growth in 3Q, this slight uptick could result from firms positioning themselves in anticipation of the trade rebalancing on the back of the new U.S. administration’s tariff plans.

Nonetheless, the weakest submarket lies in the business park segment. This latest quarterly growth of 0.2 per cent recovers some of the losses recorded in the earlier consecutive quarters, resulting in a 1.9 per cent y-y growth in business parks. Given the general geo-economic uncertainty, the need for cost containment has dulled the confidence of businesses and firms in the business park segment.

The overall weakness in the JTC rental market has been in the making for some time. Based on EDB’s latest Monthly Manufacturing Performance report in November, Singapore's manufacturing activity has slowed on a seasonally adjusted basis since August 2024. However, the rebound in November of 8.5 per cent y-y, as many market analysts observed, could have been due to pre-new year restocking as well as a pre-Trump tariff rush, especially since the bulk of the rebound was led by the strong double-digit gains in the Semiconductors, and Computer Peripherals & Data Storage clusters.

Cumulatively, over the 11M24, strong gains were also recorded by Computer Peripherals & Data Storage and Infocomms & Consumer Electronics clusters.

The latest external trade report by Enterprise Singapore further affirms this uplift as Non-oil Domestic Exports (NODX) for both electronics and non-electronics rose 9 per cent y-y basis in December, extending the growth of 3.4 per cent y-y in November.

Outlook 2025

Given the net weighted balance of 10 per cent of manufacturing firms, expect a more positive business outlook in Singapore, as provided in the latest Business Expectations of the Manufacturing Sector Oct 24-Mar 25, we should expect some support for industrial rents in 2025. The bulk of this positivity came about in the Semiconductors and General manufacturing businesses, particularly F&B-related.

However, as expectedly, downside risks remain with the new U.S. administration’s proposed 10 per cent tariff on China-made products by 1 February. This latest proposal is one of many others announced, such as those for Mexico and Canada. The impact of Trump's foreign and economic policies yet, again, lies in the details.

Globally, the story is a little mixed. According to JP Morgan Global PMI's latest report, the compositive output index rose to 52.6, up from 52.4 in November, the highest in 4 months. The growth, however, is led by an uptick in the service sector while manufacturing output has contracted for the first time in three months. Business confidence has also declined as global unrest and protectionism creeps in.

In the short to medium term, the rising regionalism will continue to fuel the industrialisation trend across Southeast Asia. Singapore should continue to benefit from this structural shift. Investors have remained confident of our potentiality, as the 3.5 per cent -y-y uptick in capital values attest. The rise in investor interests in 2023 for industrial funds in Southeast Asia should continue to provide capital support in 2025.