SINGAPORE: Maybank KE analyst Chua Su Tye noted that overall industrial leasing activity jumped 35% YoYin the first two months of 2018, the strongest since 3Q2013 (+27% YoY). This is supported by rising business optimism: a 1% net weighted balance of firms surveyed by the Economic Development Board (EDB) in 4Q2017 was positive on the manufacturing sector outlook for the six months from January to June 2018.
Moreover, the demand for factory space troughed in 2016, following a bottoming in industrial production in 2015, and rose 11% YoY in 2017.
Industrial rents also showed signs of bottoming out in 4Q2017 at -0.1%, the slowest decline in 11 quarters. “We expect rents to stabilize in 2018 and forecast 1-3% annual growth in 2018-2020, helped by easing supply, with about 9.1 million sqft in FY2018, down from 20.9 million sqft in 2017, and 8.9 million sqft until 2020. These are 0.8-1.0% of the total stock in 2018-2020,” the analyst added.
Another sign that the market is bottoming out could be found in the overseas diversification among REITs, with the acquired properties lifting overall portfolio fundamentals, by lengthening both WALEs and land tenures. “With gearing for industrial REITs averaging 36.7% at end-December 2017.
