Short leases reshape Singapore industrial property demand
Lease decay is segmenting demand, potentially widening pricing differences as longer-tenure assets attract investors while short leases depend increasingly on location and operational utility.
Singapore strata industrial transactions rose 19.7% in the second quarter, but buyers increasingly avoid properties with 15 years or less remaining on their leases.
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Buyers are becoming more selective as lease decay weighs on pricing, while owner-occupiers may still accept shorter tenures for operational flexibility.
Singapore’s industrial property market is seeing stronger transaction activity, but shortening lease tenures are increasingly influencing which assets remain investable and how buyers price them.
Strata industrial transactions rose 19.7% in the second quarter, yet Alan Cheong, Executive Director of Research and Consultancy at Savills Singapore, said buyers are increasingly avoiding properties with limited lease life.
“Buyers are now avoiding leases that are running out, particularly those that have 15 years or less,” Cheong said.
New industrial leases issued by JTC are generally capped at 30 years, with some shorter than that. Cheong said assets with around 20 years or more remaining can still attract buyers, but lease decay becomes more pronounced as tenure falls.
Properties with less than 10 years remaining face a smaller buyer pool, although demand does not disappear entirely. Some owner-occupiers may still acquire short-lease assets for temporary operational needs such as storage, inventory, or office use.
Location can also offset part of the tenure disadvantage. Centrally located properties may retain greater appeal, while larger premises on the outskirts can still attract occupiers that need space for equipment or inventory.
Owner-occupiers also assess short leases differently from investors. Cheong said businesses may accept faster lease decay if buying a cheaper property frees capital for use elsewhere in the company.
That calculation can make shorter-tenure assets commercially viable when operating returns exceed the loss in property value.
For Singapore industrial landlords and investors, the market is becoming more segmented: longer-tenure assets retain broader investment appeal, while shorter leases increasingly depend on location, operational usefulness, and the buyer’s ability to justify lease decay through business returns.