How will innovation and life sciences affect Singapore industrial asset values?

Business parks and functionally obsolescent properties will be upgraded to meet the growing demand.

COVID-19 has significantly impacted the real estate market globally, particularly the logistics sector. As demand for automation, IoT, and life sciences (e.g., biomedical, pharmaceutical and medical technology) surged, industrial properties are expected to be upgraded to meet occupiers’ needs.

According to JLL, in the last two years, major pharmaceutical companies such as BioNTech, Sanofi and Thermo Fisher Scientific have announced plans to set up new production facilities in Singapore. Demand for laboratory space has also risen for COVID-19 research and testing purposes. For example, Acumen Diagnostics opened a new lab in September 2021. Located at Science Park Road, the new lab doubled the firm’s capacity to process polymerase chain reaction (PCR) tests from 3,000 to 7,000 daily. 

Here’s more from JLL:

Riding on the growth potential of the life sciences industry, CapitaLand Development and Ascendas REIT recently announced the redevelopment of 1 Science Park Drive into a flagship Life Science and Innovation Campus within the Singapore Science Park. Designed to Green Mark Platinum standards, about 71% of the total available 112,500 sqm (about 1.2 million sq ft) of business park space (GFA) will be for life science R&D activities (i.e., wet-lab ready). Expected to be completed in 2025, the new campus will be part of a larger integrated precinct including 3 & 5 Science Park Drive.

This will be one of two brand-new upcoming business park developments catering to the life sciences industry. The mixed-use Elementum in one-north by Ho Bee Land will provide about 380,000 sq ft of business park space (GFA) for biomedical sciences research and supporting activities when completed in 2023.

The growth of the life sciences industry also generated more pharmaceutical and vaccine storage and logistics requirements. Coupled with rising storage and distribution requirements from the online food and grocery delivery business, more funds have been channelled into the setup of cold chain and temperature-controlled premises in the past two years. 

For example, Petrone Group Asia Pacific Pte Ltd — partner of Petrone Group, one of the leaders in pharmaceutical distribution — announced the opening of a pharmaceutical logistics warehouse in May 2021. In September 2021, CEVA Logistics announced the opening of a new cold station within the Free Trade Zone of the Airport Logistics Park of Singapore to meet the demands of healthcare and pharmaceutical customers. 

Last-mile logistics players and industrialists are also investing in automation and technology to cope with the business growth since the onset of COVID-19. For example, in 4Q21, Ninja Van announced the opening of its largest 80,000-sq ft automated hub in the Yio Chu Kang area, while J&T Express announced the opening of a new 82,000-sq ft fulfilment centre in the Penjuru area which is equipped with an integrated e-commerce warehouse management system.

Meanwhile, capital deployed to warehouse automated storage and retrieval systems (ASRS) — particularly in the food and beverage (F&B) industry — have also gained traction. For example, food manufacturer Tee Yih Jia’s new factory and warehouse facility in Senoko will feature an automated cold storage facility with an ASRS, and is slated to open in 1Q22. The upcoming Fairprice Group Fresh Food Distribution Centre on Sunview Road will also feature a 40-metre-high ASRS and multi-temperature cold rooms when completed in 2022. 

The COVID-19 pandemic has also led to heightened awareness of the need for food supply resilience. Coupled with Singapore’s “30 by 30” goal to produce 30% of the country’s nutritional needs locally and sustainably by 2030, this heightened awareness will drive more food innovation and distribution solutions, thereby generating demand for high-specification industrial facilities. 

As industrial property landlords/owners, investors and occupiers continue to capitalise on the growth of the life sciences and logistics industries, we expect Singapore’s industrial property stock to be refreshed as ageing and functionally obsolescent properties make way for new high-specification industrial developments. This will help to ensure that the real estate requirements of these growth industries are being met going forward.