Industrial Market Commentary: Positioning for 2026

Singapore’s industrial market delivered a resilient performance in 1H 2025, underpinned by stronger-than-expected economic growth and export frontloading ahead of tariff uncertainties. GDP expanded by an average of 4.2% year-on-year in 1H 2025, while manufacturing growth accelerated to 5.5% in 2Q 2025, reflecting continued activity in high-value manufacturing and export-oriented sectors.

Demand: Stable, Selective, and Operationally Driven

Industrial space demand remained healthy in 2Q 2025, with net absorption of approximately 285,000 sq m. Single-user factories led demand growth, supported by plant openings from multinational manufacturers, while business parks saw a notable improvement in occupancy as tenants moved into Punggol Digital District.

However, occupier sentiment has become more cautious. Transaction volumes for multi-user factory and warehouse space declined 14.3% year-on-year in 1H 2025, as businesses delayed capital commitments amid global trade and tariff uncertainties. This has led to a clear preference for leasing over ownership, with tenancy volumes rising nearly 12% quarter-on-quarter in 2Q 2025.

Looking into 2026, demand is expected to remain steady rather than expansionary. Occupiers are likely to prioritise:

• Operational efficiency and flexibility

• Well-located, modern facilities with higher specifications

• Shorter lease commitments where possible

Growth will likely be uneven, favouring advanced manufacturing, logistics, data-related uses, and food-related clusters, while more traditional or trade-dependent sectors may remain cautious.

Supply: New Completions Will Test Market Absorption

On the supply front, completions in 2Q 2025 exceeded demand, leading to a slight dip in overall occupancy to 88.8%. This trend is expected to continue into 2026, as a pipeline of multi-user factory and specialised facilities—particularly in Tampines, Tuas, Mandai, and western Singapore—comes onstream.

Several large-scale projects scheduled for completion in 2026 will add meaningful new stock to the market. While this will enhance choice and quality for occupiers, it may also cap rental and price growth, especially in locations without strong tenant catchments or differentiated specifications.

Prices and Rents: Flat with Pockets of Resilience

Price growth moderated further in 2Q 2025 to 1.4%, while rents edged up modestly by 0.7%. Business park rents continued to outperform, reflecting improving occupancy and demand from technology and digital economy tenants.

In 2026, prices and rents are expected to remain largely range-bound, with:

• Upward pressure limited by incoming supply

• Better-performing assets outperforming older, less efficient stock

• Landlords competing more actively on incentives and flexibility

Outlook for 2026: A Tenant-Led, Quality-Focused Market

Overall, 2026 is shaping up to be a balanced but tenant-driven market. While macroeconomic and trade risks remain, Singapore’s position as a high-value manufacturing base and regional logistics hub continues to support baseline demand.

For occupiers, 2026 may present opportunities to:

• Upgrade to newer facilities

• Secure favourable lease terms

• Reposition operations without aggressive rental escalation

For investors and owners, performance will increasingly depend on asset quality, location, and adaptability, rather than broad market uplift.