Singapore's industrial sector is near a tipping point, and rents are expected to decline 7-10 percent on rising vacancy rates, DBS Vickers said, adding that its top pick among real estate investment trusts with exposure to the sector is Mapletree Logistics Trust.
As of 0259 GMT, units of Mapletree Logistics, which owns logistic assets, were down 0.45 percent at S$1.095 but have surged 31.7 percent since the start of the year, compared to a 32 percent rise in the FTSE ST Real Estate Industrial Trust Index.
Lower completion of new industrial space over the last few years had resulted in record low vacancy levels and a strong surge in industrial capital values and rents since the start of 2012.
However, DBS estimates that close to 49.7 million square feet of industrial space under construction now will be completed over 2013-2015, which represents more than twice the annual supply over the last decade.
"As operating conditions get progressively tougher in the coming quarters, we believe that industrial landlords will likely see lower retention rates," said DBS in a report.
The brokerage forecasts vacancy rates to rise by 4-5 percentage points as a result and spot rents to decline by 7-10 percent over 2013-2015.