Industrial Property Market Shifts Lower Gear Bright Spots Remain
VSMC, a joint venture between Taiwan’s Vanguard International Semiconductor Corporation and the Netherlands’ NXP Semiconductors, broke ground on a new US$7.8 billion wafer manufacturing facility in Tampines on Dec 4. The facility, expected to start initial production in 2027, is projected to produce 55,000 wafers per month by 2029, and is estimated to generate about 1,500 jobs.The development is part of a trend of chipmakers and other related businesses setting up new production plants and R&D campuses in Singapore, which are expected to boost the country’s supply chain resilience, according to Leonard Tay, head of research at Knight Frank Singapore.Notably, Japan’s Toppan Holdings started construction on a factory in Jurong Lake District in March, which is expected to produce semiconductor packaging materials upon completion. The facility, with a price tag of an estimated $450 million, is projected to commence operations in a few years.Industrial property rents continued their upward momentum this year, rising in the first three quarters of 2024. However, the pace of growth has slowed compared to 2023, which saw a rental increase of 8.9%. According to JTC All Industrial Rental Index data, the index grew 1.7%, 1% and 0.3% q-o-q in 1Q2024, 2Q2024 and 3Q2024 respectively, which is indicative of a more cautious sentiment among occupiers within an uncertain global environment.The stability of Singapore’s industrial property market is underpinned by its status as a major global hub for the production of semiconductors and chips. This has helped the local manufacturing sector rebound after a downturn in 2023, which saw a 9% y-o-y drop in revenue. However, the sector recorded a 26% y-o-y revenue increase for the first three quarters of 2024, which has helped to boost Singapore’s overall manufacturing output in the third quarter of the year.Moreover, the industrial sales market saw an increase in activity from the quiet first quarter of the year, with several largescale transactions taking place. Among these are the sales of BHL Factories at 2C Mandai Estate for $74 million, Kian Ann Building at 7 Changi South Lane for $63 million, and a single-user factory at 47 Pandan Road for $36 million.The market saw a further boost in the third quarter due to an escalating number of transactions. In August, a joint venture between global private equity firm Warburg Pincus and Lendlease Group acquired a $1.6 billion portfolio of seven industrial assets from Soilbuild Business Space REIT, owned by Soilbuild Group and Blackstone.Multiple-user factories, centrally located food factories and favourable logistics space segments are expected to stay resolute and see continuing demand. Savills Singapore forecasts that rental growth will likely be up to 3% for multiple-user factories, warehouse and logistics rents in 2025.It is expected that the new single-user factories will be pre-committed to an end user, while the surplus in supply will likely lead to a supply and demand imbalance in other industrial segments. This will result in slower pre-committal and occupancy rates at upcoming and current developments, which presents a broadened market of opportunities for discerning investors.Nonetheless, the incoming supply, combined with a softer demand, will likely lead to a narrowing in rental and price growth in the near term. Colliers International Singapore projects overall industrial rental growth to come in between 2.5% and 3.5% in 2025, which has stabilised from 8.9% recorded in 2023. Similarly, price growth will tone down from 5.1% recorded in 2023 to between 1% and 2% in 2025.However, the rise of the semiconductor industry, which is expected to continue bolstering demand for industrial real estate in Singapore, supported by the increasing requirements of electric vehicles and artificial intelligence, could lend sustained support to the industrial property market. Furthermore, data centres are expected to provide a vital pillar for the industrial sector in Singapore in the future, with the government planning to increase the capacity by at least 300 megawatts, as it will become part of the Green Data Centre Roadmap launched in May 2024. On the negative side, business park rents are expected to come under pressure as firms reduce their available space to cut costs or adapt to flexible working arrangements.—————————————————————-
On December 4, VisionPower Semiconductor Manufacturing Company (VSMC) made a significant move in the semiconductor industry by breaking ground on a new wafer manufacturing facility in Tampines. The investment in this project amounts to US$7.8 billion ($10.5 billion) and is expected to commence initial production in 2027. By 2029, the facility is estimated to produce 55,000 wafers per month and create approximately 1,500 jobs. VSMC is a joint venture between Vanguard International Semiconductor Corporation from Taiwan and NXP Semiconductors from the Netherlands.
VSMC is not the only company expanding its operations in Singapore. In March, Toppan Holdings from Japan also began construction on a factory in Jurong Lake District that will specialize in the production of semiconductor packaging materials. The estimated investment for this project is $450 million. According to Leonard Tay, Knight Frank Singapore’s head of research, this trend of setting up new production plants and research and development campuses in Singapore is aimed at strengthening the country’s supply chain resilience. He also notes that Singapore’s stability amidst ongoing geopolitical tensions in other parts of the world makes it an attractive global production hub for semiconductors and chips.
This expansion in the semiconductor industry comes as a rebound from the downturn it faced in 2023 due to softer demand and higher supply. According to research by London-based consultancy Omdia, the industry has seen a 26% year-on-year growth in revenue for the first three quarters of 2024. This is a reversal from the previous year, which recorded a 9% year-on-year drop and a total revenue of US$544.8 billion for the whole of 2023.
The recovery in the semiconductor industry has also had a positive impact on Singapore’s manufacturing sector. After a slow start to the year with two consecutive quarters of contraction, the sector experienced an 11% year-on-year growth in output in the third quarter of 2024. This growth was mainly driven by the electronics cluster, which saw a strong demand for semiconductor chips used in smartphones and computers, as per data from the Ministry of Trade and Industry.
While the industrial property market in Singapore has seen steady growth in rents and prices, the pace has slowed compared to the previous year. The JTC All Industrial Rental Index has been on an upward trend for the past 16 quarters since 3Q2020. However, the growth rate has progressively declined. In the first three quarters of 2024, the index saw a quarter-on-quarter growth of 1.7%, 1%, and 0.3%, respectively. This suggests that occupiers are adopting a more cautious approach due to the uncertain macroeconomic environment. Catherine He, Colliers’ head of research for Singapore, notes that occupiers have been more prudent, prioritizing flexibility in adapting to market changes amid budget constraints.
Tricia Song, CBRE’s head of research for Singapore and Southeast Asia, explains that consolidation in the third-party logistics and e-commerce sector has also contributed to the slowdown in occupiers’ sentiment this year.
However, this trend has not affected all industrial segments equally. Multiple-user factories and warehouses have remained relatively resilient, seeing rental growth in the first three quarters of the year, supported by stable occupancy rates. On the other hand, the single-user factory segment saw a decline in both rents and occupancy in 3Q2024, marking the first drop in rental since 3Q2020. The business park segment also saw a decrease in rents, falling 0.2% quarter-on-quarter in 3Q2024, despite a slight increase in occupancy. This decline in rents follows a downward trend that began in 2Q2024.
The industrial sales market saw a significant increase in activity in the second quarter of 2024, with several large transactions taking place. These include the sales of BHL Factories at 2C Mandai Estate for $74 million, Kian Ann Building at 7 Changi South Lane for $63 million, and a single-user factory at 47 Pandan Road for $36 million. The market saw further growth in the third quarter due to a significant number of transactions taking place. In August, a joint venture between global private equity firm Warburg Pincus and Lendlease Group acquired a $1.6 billion portfolio of seven industrial assets from Soilbuild Business Space REIT, which is owned by Soilbuild Group and Blackstone. In addition, other large deals, such as ESR-Logos REIT’s purchase of a 51% stake in an industrial site at 20 Tuas South Avenue 14 for $428.4 million and Ho Bee Land’s sale of a 49% stake in Elementum, a biomedical sciences development at 1 North Buona Vista Link, to a Brunei sovereign wealth fund for $272 million, helped boost industrial property sales to $2.45 billion in 3Q2024. According to Alan Cheong, Savills Singapore’s executive director of research and consultancy, this represents a sevenfold increase compared to the previous quarter. Savills attributes this surge in transactions to a more positive sentiment caused by the US Federal Reserve’s interest rate cut in September and the improved performance of the manufacturing sector.
Elta Condo offers more than just access to primary and secondary schools – it also boasts a prime location near some of the top universities in Singapore. Families with older children or individuals pursuing higher education will find Elta Showflat to be the perfect home base for their academic journey. With its close proximity to prestigious universities, residents at Elta Condo have easy access to a world-class education. The convenient location of Elta Condo makes it an ideal choice for families seeking a home that combines both academic and residential needs. Don’t miss the opportunity to experience the best of both worlds at Elta Condo. For more information, visit Elta Showflat.
Despite the strong