Singapore to see a substantial amount of new industrial supply in 2021
Some 29m sq ft of industrial space is expected to be completed this year.
Industrial price and rent indices turned a corner in Q4 2020, after declining in consecutive quarters throughout all of 2020. According to Knight Frank, the all-industrial price index increased by 1.0% and the rental index increased by 0.1% in Q4 2020, while a similar modest price and rental growth was also reported for each industrial type (multiple-user factory, single-user factory, business park and warehouse).
In the last quarter of 2020, the manufacturing sector grew by 9.5% year-on-year (y-o-y) driven by output expansions in the electronics, biomedical manufacturing and precision engineering clusters. For the whole of 2020, advanced estimates from the Ministry of Trade and Industry (MTI) showed that the manufacturing sector grew by 7.1% y-o-y, despite the overall economy contracting by 5.8%.
The Economic Development Board (EDB) also recently announced that overall manufacturing output increased 7.3% in 2020 over 2019. As such the impact of the recession on the industrial real estate sector can be considered as being almost benign, with the all-industrial price and rental indices easing by a moderate 2.7% and 1.5% y-o-y respectively.
At the same time, the overall occupancy rate continued to increase by a marginal 0.3 percentage points q-o-q and 0.7 percentage points y-o-y to 89.9% by end-2020.
While recovery in manufacturing and the industrial property sector looks firmly on track in 2021 especially with the start of COVID-19 vaccinations in Singapore, a substantial amount of new supply looms. In 2021, some 29 million square feet (sq ft) of industrial space is expected to be completed comprising more than 5.3 million sq ft of space that was pushed back from 2020 due to construction delays. Single-user and multiple-user factory space make up a 76% majority of completions in 2021.
Taking into consideration the phased withdrawal of government fiscal support for businesses, multiple-user factory prices and rents are likely to come under some pressure, falling by about 5% in 2021 as these premises tend to be occupied by smaller enterprises. Single-user factories that are typically developed by manufacturers for their own use could fare slightly better.
However, with the distribution of COVID-19 vaccines, the city-state’s strategic location and developed IT infrastructure would position Singapore as a key warehousing and storage hub, and logistics properties are expected to benefit with price and rent increases ranging from 1% to 3% in 2021. Especially so, for cold-storage facilities that cater to the requirements of housing the temperature-controlled vaccine.