Savills Singapore reports that whilst the manufacturing sector in Singapore saw a significant 12.5% year-on-year increase in Q2 2026, this growth has not translated into increased industrial leasing activity. Leasing transactions fell by 4.6% compared to the same period last year, as businesses remain cautious amid economic uncertainties.
The Ministry of Trade and Industry’s advance estimates show that Singapore’s overall economy grew by 5.9% year-on-year in Q2 2026, a slight decrease from the 6.3% growth in Q1. The manufacturing sector, however, was buoyed by strong demand for semiconductors and related equipment, driven by artificial intelligence (AI) advancements.
Despite this, the industrial leasing market remains subdued, particularly in the single-user factory and warehouse segments. Savills notes a preference for modern, well-connected spaces, with prime warehouse and logistics assets experiencing a 2.3% quarter-on-quarter rental growth. In contrast, prime multiple-user factory rents dropped by 1.4%, reaching a two-year low.
Ashley Swan, Executive Director at Savills Singapore, commented on the market’s selectivity: “Demand remains stronger for modern logistics and higher-quality industrial space, particularly where properties offer the efficiency, connectivity and specifications occupiers require.”
In the sales market, strata industrial sales rebounded by 19.7% quarter-on-quarter, reversing previous declines. However, buyers are increasingly selective, focusing on well-located assets with longer lease tenures. Alan Cheong, Executive Director of Research & Consultancy at Savills Singapore, highlighted potential weaknesses in the market, stating, “The decline in leasing transactions on a year-on-year basis could point to latent undercurrents of weakness in the industrial occupier market.”
Looking ahead, Savills forecasts that multiple-user factory rents will remain flat in 2026, whilst warehouse and logistics rents are expected to grow by approximately 1%, supported by ongoing demand for modern logistics spaces.
