MANUFACTURING BRIGHT SPOTS IN ELECTRONICS
Amid heightened geopolitical uncertainty arising from the Middle East conflict, Singapore’s economic growth for 2026 is expected to be revised lower than the
current 2.0-4.0% yoy forecast. The manufacturing sector outlook is expected to remain largely resilient, driven by the electronics cluster, though the ongoing
Middle East conflict has raised downside risks. The Purchasing Managers’ Index (PMI) edged up to 50.6 points in February, or the seventh consecutive month of expansion. Manufacturing output fell 0.1% yoy in February, following past five straight months of expansion, of which only the electronics cluster registered growth.
BROAD-BASED RENTAL GROWTH
A broad-based rental growth was recorded across all industrial property segments in Q1 2026. Both suburban business parks and prime logistics outperformed, growing by 1.7% qoq and 1.5% qoq respectively, though it was mainly due to the adjustment of our property basket to include newer properties. Warehouse rents grew at a faster pace of 0.5% qoq in Q1 2026, as vacancies tightened. City fringe business park recorded 0.7% qoq rental growth, driven by one of the newer properties in our basket. Conventional factory and high-tech rents rose moderately by 1.5% qoq and 0.3% qoq respectively.
TIGHTENING SUPPLY SITUATION
Incoming new supply of most industrial property segments, except for the single-user factory, in 2026 is expected moderate and fall below their respective ten-year historical averages. Majority of single-user factory and warehouse new supply in 2026 is expected to be catered for end-users, of which there will be no new major prime logistics project in 2026. The supply pipeline for business park will tighten in 2026 onwards, with the sole new project completion (27 International Business Park) anticipated to be completed in 2026. The Middle East conflict is likely to result in a prolonged period of elevated energy prices, driving higher construction and logistics costs. This may temper new development demand and further tighten new supply over the medium term as overall development costs rise. At the same time, higher transportation costs are expected to prompt occupiers to increasingly prioritise well-located logistics developments that can help reduce logistics expenses.
