The first quarter of the year saw a decrease in leasing and sales activity in the logistics and industrial property market according to research conducted from Knight Frank Singapore. The data compiled by the consulting firm indicates that industrial sales totalled $799.4 million in 1Q2023 — which is an 11.6% q-o-q decline.
J’Den ebrochure for its commercial spaces on the first two floors provide residents with quick access to amenities. There are also a variety of communal facilities, a refreshing swimming pool and ample underground parking.
Some notable deals include the sale to four properties from Cycle & Carriage to M&G Real Estate for $333 million, and selling the J’Forte Building to Boustead Industrial Fund for more than $100 million. Other than that, the 97% of the caveats filed were for deals of $10 million or less, says Norishikin Khalik, the director of strategy and solutions for occupiers for Knight Frank Singapore.
The drop in sales of industrial investments comes in the midst of a more negative manufacturing forecast in Singapore for the year ahead. Singapore’s Ministry of Trade and Industry estimates that Singapore’s GDP will range from 0.5% to 2.5% in 2023. This is lower then its 3.6% growth registered in 2022.
Other indicators suggest a more negative outlook, such as Economic Development Board’s quarterly economic forecast survey that shows mostly negative sentiments within the manufacturing industry for the period January through June. Additionally the manufacturing output of Singapore decreased by 8.9% y-o-y in February Bio-medical manufacturing declined the most significantly with 33.6%.
In the end, the result were “slightly lesser demand” for space in factories in the 1Q2023, which resulted in lower leasing activity between February and January, according to Norishikin. In the beginning in the calendar year the island-wide leasing for multi-user factories dropped in 1.5% to 1,548 tenancies as compared to the initial four months of the 4Q2022.
But, she adds that rents grew in all industrial property kinds as median rents increased 4.7% q-o-q to $2.01 per sq ft for the month. “While the electronics industry is undergoing a tough time, the demand for electronics is supported by the transport engineering industry and the growing travel sector and also for industrial operations that aid in the construction industry as well as the expansion of Singapore’s energy infrastructure that is sustainable,” she says.
Despite the lower leasing and sales, Norishikin highlights some new innovative facilities that have been brought into operation or are currently in the process of being constructed. This month, Hyundai Motor Group began operations in their brand new electric vehicle manufacturing facility in Jurong Singapore’s first assembly facility in more than 40 years. Cell-based meat maker Esco Aster will set up an 80,000 sq. ft. facility in Changi and Commonwealth Kokubu Logistics broke ground for a 500,000 square foot cold-chain food logistics facility in Jalan Besut. Both facilities are expected to open in 2025.
In any event, Norishikin expects the industrial property segment to remain steady and stable, with a “cautious” cost and growth in rental of one% or 3% for the majority of industrial property kinds in 2023. “Due to the tight supply of quality logistics space, it is possible that rents can be expected to grow by than 3% up to%,” she adds.
The outlook for growth in the longer term is also optimistic. For 2022 Singapore reported $22.5 billion worth of fixed asset (FAI) commitments. That’s which is a 90% increase in y-o-y growth as compared with $11.8 billion by 2021. In the total flow approximately 77.2% was for manufacturing and 66.8% contributed by the electronics industry.
This record number of FAI investments in the last year is expected to bring a boost to Singapore’s industrial sector, says Norishikin. “Notwithstanding the grim outlook for the next year investment in advanced manufacturing remain strong and poised to serve as a catalysts for industrial growth when the economic cycle starts to improve.”
Additionally, due to China’s reopening of borders Chinese manufacturers may also be considering other safe locations that aren’t within their own border, she adds. “Singapore is a great option for companies looking to set up manufacturing facilities and headquarter offices in this region.”