Singapore has witnessed a consistent surge in demand for condos, and this can be attributed to various factors. However, one of the main reasons behind this phenomenon is the limited availability of land. As a small island nation with a rapidly expanding population, Singapore faces the challenge of scarcity of land for development. As a result, the government has put in place strict land use policies, making the real estate market highly competitive. This, in turn, drives up property prices, making real estate investment, especially in condos, a profitable venture with the promise of capital appreciation. With the addition of Singapore Projects, the demand for condos is expected to remain high in the coming years.
Industrial unit at Gul Circle on sale for $4.5 mil Industrial building at Little Road up for sale at $9.5 mil
VisionPower Semiconductor Manufacturing Company (VSMC) has recently made headlines for breaking ground on a new wafer manufacturing facility in Tampines. The US$7.8 billion ($10.5 billion) plant, set to begin initial production in 2027, is expected to produce 55,000 wafers per month by 2029 and create around 1,500 job opportunities. VSMC, a joint venture between Vanguard International Semiconductor Corporation from Taiwan and NXP Semiconductors from the Netherlands, is not the only company expanding its presence in Singapore. In March, Toppan Holdings from Japan started construction on a new factory in the Jurong Lake District that will produce semiconductor packaging materials. With an estimated investment of $450 million, Toppan’s project is set to further enhance the country’s position as a global hub for semiconductor production. According to Leonard Tay, the head of research at Knight Frank Singapore, these expansions are a result of companies wanting to strengthen their supply chain resilience by setting up facilities and R&D campuses in Singapore. He adds that the country’s stability amid ongoing geopolitical tensions in other parts of the world is a major factor in attracting these businesses.
The global semiconductor industry has witnessed a rebound in recent years after facing a downturn in 2023 due to softening demand and high supply. According to research by Omdia, revenue in the industry has increased by 26% year-on-year in the first three quarters of 2024. This is a drastic turnaround from the previous year, when the industry saw a 9% decline with a total revenue of US$544.8 billion. This recovery has had a positive impact on Singapore’s manufacturing sector, with a growth in output of 11% year-on-year in the third quarter of 2024. This was mainly driven by the electronics cluster, which saw a strong demand for semiconductor chips used in smartphones and PCs.
However, the growth in Singapore’s industrial property market has been more subdued compared to the previous year. While the JTC All Industrial Rental Index has continued to rise for the 16th consecutive quarter since the third quarter of 2020, the momentum has slowed down. The index recorded an 8.9% increase in rents in 2023, but this growth has progressively slowed down in the first three quarters of 2024, with an increase of 1.7%, 1%, and 0.3% respectively. This plateauing trend is attributed to a more cautious sentiment among occupiers due to the uncertain macroeconomic environment. Catherine He, Colliers’ head of research for Singapore, notes that occupiers have become more prudent with their budgets and are looking for flexible options to adapt to the changing market dynamics. The rise in consolidations in the third-party logistics and e-commerce space has also contributed to this trend.
However, the impact of these factors has been uneven across different segments. While the multiple-user factory and warehouse segments have remained resilient with increasing rents and stable occupancy rates, the single-user factory segment saw a decline in both rents and occupancy in the third quarter of 2024. This was the first time since the third quarter of 2020 that this segment recorded a rental decline. Business park rents also dipped, despite a marginal increase in occupancy. This mixed performance in the industrial property market can be attributed to the supply-demand imbalance in certain segments, as well as the cautious sentiment among occupiers.
Although the leasing activity has been mixed, the industrial sales market has been more lively. There were several significant transactions in the second quarter of 2024, such as the sale of BHL Factories for $74 million in May, Kian Ann Building for $63 million in June, and a single-user factory for $36 million in April. This trend continued in the third quarter, with several large deals, including a $1.6 billion portfolio sale of seven industrial assets by Soilbuild Business Space REIT to a joint venture between Warburg Pincus and Lendlease Group. This increased activity resulted in a sevenfold jump in industrial property sales to $2.45 billion in the third quarter of 2024, according to Alan Cheong, the executive director of research and consultancy at Savills Singapore. He attributed this increase in transactions to the improved sentiment due to the US Federal Reserve’s interest rate cut in September and the better performance of the manufacturing sector.
Despite the strong performance in the third quarter, Cheong believes that the big-ticket industrial deals are likely a one-off and that the market may see only one or two large deals in 2025, with each being significantly lower than $1 billion.
Looking ahead, the influx of new supply, coupled with weaker demand, is expected to narrow the rental and price growth in the near term. The JTC estimates that around 0.2 million sqm of new industrial space will be completed in the fourth quarter of 2024, with a further 1.6 million sqm targeted for completion in 2025. This influx of supply, along with the cautious sentiment among occupiers, is expected to result in a supply-demand imbalance in some industrial segments. However, there are some bright spots, such as the multiple-use factory space and centrally located food factories, which are expected to remain resilient. Additionally, the electronics and advanced manufacturing sectors are expected to continue attracting investments, while data centres are likely to play an important role in the country’s industrial sector as the government plans to increase their capacity by 300 megawatts. Despite softening rental and price growth in the near term, the outlook for Singapore’s industrial property market remains positive, with demand expected to remain healthy in the coming years.