Singapore industrial rental index rose by 6.9% in 2022

Meanwhile, the price index grew 7.5% during the year.

According to a Knight Frank report, Singapore’s manufacturing sector ended the year 2022 in positive territory, growing 2.6% based on advanced estimates from the Ministry of Trade and Industry. This supported industrial real estate prices and rents. 

In the fourth quarter 2022, the all-industrial price index increased by 1.7% q-o-q with a full year increment of 7.5% y-o-y, while the rental index inched upward by 2.1% q-o-q in Q4 2022 to chalk up 6.9% for the whole of 2022, the report said.

Here’s more from Knight Frank:

Characterised by Singapore’s attractive proposition as a manufacturing location in an increasingly uncertain world, the rise in industrial prices and rents in 2022 was moderately higher than the Knight Frank’s earlier expectations of a 3% to 5% increase at the beginning of the year.

Although the manufacturing and industrial real-estate outlook turned cautious in the latter half of 2022 due to rising interest rates, continued global supply disruptions and the challenging times faced by the technology sector. And even though the electronics sector is going through a rough patch, investments continue to flow into Singapore with the belief that growth will return and be sustainable in the long-run. 

In Q4 2022, semi-conductor companies Applied Materials announced a S$600 million 700,000 sf plant in Tampines Industrial Crescent to be ready in 2024 that would double its manufacturing presence in Singapore, while Soitec broke ground on a S$571 million extension to its Wafer Fab Park in Pasir Ris. Singapore will also have five new vaccine producing facilities, set up by pharmaceutical firms Thermo Fisher Scientific, Sanofi, BioNTech, Hilleman Laboratories and MSD. 

Additionally, data centre operators Digital Realty and Equinix were reported to be looking to expand in Singapore by applying to develop new data centres, after a moratorium issued in 2019 to pause the release of land for data centre use was lifted. These in turn create demand for local Singapore enterprises. 

Against this backdrop, the net new demand of industrial space increased by some 2.9 million sf in Q4 2022 and 7.9 million sf for all of 2022. At the same time, about 14.1 million sf of new industrial space came on stream in 2022. As net new supply outstripped net take-up, the overall industrial occupancy rate narrowed marginally by 0.8 percentage points y-o-y to 89.4%.

Going forward, an estimated 18.9 million sf of industrial space is expected to complete in 2023. About 9.2 million sf or 48.7% of new industrial supply comprise single-user factory space, typically developed by the manufacturers for their own use. New warehouses make up 5.3 million sf, and this would provide much needed logistics space, providing some relief to the tight supply in the market. 

Despite the upcoming industrial supply in a time of decreasing exports and decaying manufacturing sentiment, Singapore will continue to attract fixed asset investment (FAI) into the manufacturing sector as global manufacturers look for locations with political stability, an educated workforce and modern infrastructure as part of flight-to-stability strategies. As such, industrial prices and rents will remain stable with a marginal growth of 1% to 3% for the whole of 2023. In the logistics segment, where supply is tight, rents for quality warehouse space might increase by a higher 3% to 5% in the year ahead.