TAILWINDS FROM AI-RELATED DEMAND
Singapore’s economy grew by 5.9% yoyin Q2 2026 and recorded a 6.1% yoy growth in H1 2026, surpassing expectations and resulting in an upgrade of the GDP growth forecast for 2026 to 4.5%-5.5% yoy. The Purchasing Managers’ Index (PMI) rose to 51.5 points in August, or the highest reading since November 2018 and marking the thirteenth consecutive month of expansion. Total manufacturing output expanded by 15.4% yoyin August, led by the precision engineering cluster, signifying the twelfth consecutive month of growth.
MODERATE RENTAL GROWTH
Conventional factory recorded the strongest rental growth of 0.6% qoqin Q3 2026, as vacancy rates stabilised. Prime logistics and warehouse rents grew by 0.2% qoqand 0.4% qoqrespectively in Q3 2026. Vacancy rates of both prime logistics (4.9%) and warehouse (5.5%) rose slightly, though demand remains resilient especially from third-party logistics players. High-tech rents rose by 0.3% qoqas vacancy rates continued to decline to 13.5% in Q3 2026, underpinned by demand from semiconductor and AI-related firms. Business park (city fringe and suburban) and science park rents remained stable in Q3 2026. City fringe business park vacancy rates have declined to 6.6%, or the lowest level since Q4 2023, though it may face pressure from emerging secondary space over the coming quarters.
PRIME LOGISTICS VACANCIES TO TIGHTEN
Demand for prime logistics has remained resilient, especially for newer properties such as 36 Tuas Road and Mapletree Joo Koon Logistics Hub which are both fully occupied. Incoming prime logistics supply remains tight, with no new completions in 2026 and only about 460,000 sf (Sunview Logistics and Container Hub which is estimated 70% pre-committed with the remainder 30% for lease) expected to come onstream in 2027 and 633,133 sf (2 Clementi Loop) in 2028. Over the near term, constrained prime logistics supply, elevated development costs and resilient demand is expected to support rental growth and vacancy rates are expected to fall. Beyond 2028, approximately 1.1 million sf of new prime logistics space is expected to arise from the redevelopment of 51 Tuas View Link, which was acquired by PGIM and Northstar Capital earlier this year.
