Multiple-user factory rents in Singapore to increase by 2% this year 

Meanwhile, warehouse & logistics rents could grow 3%.

The manufacturing sector was set to propel Singapore’s economic recovery in the beginning of the year, but the Russia-Ukraine conflict brought new challenges. The elevated oil and energy prices are expected to have an impact on the electricity and transportation costs for industrialists and manufacturers. 

According to Savills, the conflict will further strain global manufacturing and supply chains as Russia and Ukraine are major exporters of commodities such as wheat, nickel and palladium. This could in turn lead to another wave of disruption and stockpiling. A protracted conflict will affect business confidence and weigh on global economies and impact their recovery from the pandemic. 

Here’s more from Savills:

Despite the global headwinds, industrial and logistics are likely to remain as a favoured real estate sector. In light of operational constraints amid the pandemic, many businesses intensified their efforts to embrace advanced manufacturing, adopt new technology and upskill their workforce. Some initiatives to address the accelerated structural shifts resulting from COVID-19 include the digitalisation of warehousing operations and automation of production lines to cope with fluctuations in demand.

Owing to a faster pace of Industry 4.0. transformation, there is a greater shift of demand from traditional factories and warehouses to high-specification industrial facilities, last mile delivery/urban logistics and temperature-controlled facilities. This is fuelled by manufacturers gearing up for a post-pandemic future where supply chains will have to be increasingly nimble. 

Notably, due to the pivot to Industry 4.0, landlords of older developments are likely to take the opportunity to embark on asset enhancement initiatives and redevelopment works to remain relevant. Nonetheless, the supply of modern industrial facilities with quality specifications is expected to remain limited in the near term because of construction delays. 

If inflation, which was already high, catalysed by supply chain disruptions caused by the pandemic, gets further boosted by the Ukrainian conflict, it may spur companies to purchase their own properties or sign long term leases. Although the prospect of stagflation may set in, the situation we have now could create the conditions for industrial/warehousing rents and prices to rise despite the economy not performing well. 

Taking the above-mentioned factors into account, rent for prime multiple-user factory and warehouse & logistics properties is forecast to grow by up to 2% and 3% respectively in 2022.