Singapore has long been recognized as one of the most innovative and dynamic economies in the world, with a thriving manufacturing sector that plays a significant role in the country’s economic growth. The industrial property market in Singapore has seen steady growth in recent years, driven by demand from e-commerce, technology, and life science sectors. However, the COVID-19 pandemic and global economic uncertainty have brought new challenges to the market. In this article, we will provide an overview of the current state of Singapore’s industrial property market, examine the factors driving growth and challenges facing the sector, and provide an outlook for the future of the market.
Industrial Property Market in 2022
The Singapore industrial property market witnessed significant trends in 2022, with the COVID-19 pandemic continuing to impact the economy. Despite the challenges, the industrial property market remained resilient due to the strong demand for industrial spaces from e-commerce, life science, and technology sectors.
The limited supply of prime logistics and warehouse spaces led to steady rent increases throughout the year. According to Savills Research, the rents for prime warehouse and logistics properties are expected to rise by 2% to 5% YoY in 2023, similar to 2022, while the conventional factories and outlying business parks may witness slower growth of up to 1.0% due to higher supply pipelines.
Additionally, the demand for warehouses could reduce in 2023 due to lower e-commerce demand, and the anticipated easing of supply chain disruptions in 2023 could lead to a slower stockpiling demand. Despite this, the industrial market’s long-term outlook remains promising, with the manufacturing sector expected to grow by 50% by 2030.
Long-Term Outlook for Singapore’s Industrial Property Market
Despite short-term challenges, the long-term outlook for Singapore’s industrial property market remains positive. According to the Singapore Economic Development Board (EDB), the manufacturing sector is expected to grow by 50% by 2030. This growth will be driven by the global trend of digitalization, automation, and cloud adoption, which will drive demand in the electronics and electronics-related sectors.
Moreover, Singapore has been positioning itself as a regional hub for high-value manufacturing activities, including research and development, innovation, and intellectual property creation. The government has been actively promoting the development of advanced manufacturing capabilities and technology adoption, which will enhance the country’s competitiveness in the global market.
The ongoing COVID-19 pandemic has accelerated the shift towards automation and digitalization, making Singapore an attractive destination for businesses looking to enhance their manufacturing capabilities. Additionally, the government’s efforts to create a conducive business environment and attract foreign investments will further boost the growth of Singapore’s industrial property market in the long run.
Forecasts for Industrial Property Market in 2023
Despite the challenging economic conditions, Singapore’s industrial property market is expected to remain strong in 2023. The limited supply of new properties, coupled with sustained demand from the e-commerce, life sciences, and technology sectors, is expected to drive rental growth for new economy assets, including prime logistics, warehouses, and city-fringe business parks.
According to Savills Research, rents for prime warehouse and logistics properties are projected to rise by 2% to 5% year-on-year (YoY) in 2023, similar to the growth rates observed in 2022. However, the tight supply of warehouse spaces is likely to continue beyond 2024, when no significant new supply is expected to come on stream. This could result in further upward pressure on warehouse rents, providing an excellent opportunity for investors looking to capitalize on the strong demand for industrial properties in Singapore.
On the other hand, conventional factories and outlying business parks are expected to experience slower growth of up to 1% in 2023 due to a higher supply pipeline. Additionally, the demand for warehouses may reduce in 2023 due to lower e-commerce demand, and the anticipated easing of supply chain disruptions may lead to a slower stockpiling demand.
Despite these challenges, the long-term manufacturing outlook for Singapore remains promising, with the manufacturing sector expected to grow by 50% by 2030. The global trend of digitalization, automation, and cloud adoption is expected to drive growth in the electronics and electronics-related sectors, maintaining strong growth prospects for the industrial market in 2023 and beyond.
In summary, the industrial property market in Singapore is expected to remain resilient in 2023, driven by the limited supply of properties and sustained demand from the new economy sectors. While there may be some challenges in the short term, the long-term outlook for Singapore’s industrial property market remains positive.
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