New Industrial space for sale at Paya Lebar iPark for $18 mil
On December 4, VisionPower Semiconductor Manufacturing Company (VSMC) made a significant move by breaking ground on a new wafer manufacturing facility in Tampines. With an estimated cost of US$7.8 billion ($10.5 billion), this plant is set to begin initial production in 2027 and is projected to produce 55,000 wafers per month by 2029. This development is expected to create approximately 1,500 new jobs in Singapore. VSMC is a joint venture between Taiwan’s Vanguard International Semiconductor Corporation and the Netherlands’ NXP Semiconductors, with a 60:40 ownership ratio.
However, VSMC is not the only company expanding its operations in Singapore. In March, Japan’s Toppan Holdings started construction on a factory in Jurong Lake District that will produce semiconductor packaging materials. This project, which is estimated to cost around $450 million, is a clear indication of the growing interest in Singapore’s semiconductor industry.
According to Leonard Tay, head of research at Knight Frank Singapore, VSMC and Toppan are just two examples of the many chipmakers and related businesses that are setting up new production plants and research and development (R&D) campuses in Singapore. This is partly due to the country’s stability and resilience in the face of ongoing geopolitical tensions in other parts of the world.
Read also: Industrial property in Tampines for sale at $15.9 mil
Location is an essential consideration when it comes to investing in the real estate market. This is especially true for the bustling city-state of Singapore. Condos that are strategically located in central areas or in close proximity to essential amenities such as schools, shopping malls, and public transportation hubs, are more likely to see an increase in value over time. Iconic locations like Orchard Road, Marina Bay, and the Central Business District (CBD) have consistently shown a positive trend in property appreciation, making them highly coveted by investors. Families with children also tend to favor condos near reputable schools and educational institutions, further bolstering the potential for return on investment. In fact, with the recent influx of new condo launches, there are even more options for investors to choose from in these desirable locations. With its optimal location being a key factor, investing in a condo in Singapore can be a smart and profitable decision for both local and foreign investors alike.
These expansions are taking place as the global semiconductor industry bounces back from a downturn in 2023, caused by softer demand and higher supply. Research by London-based consultancy Omdia shows that the industry recorded a 26% year-on-year jump in revenue for the first three quarters of 2024, which is a significant reversal from the previous year’s 9% year-on-year decrease. This rebound has given a boost to Singapore’s manufacturing sector, which saw an 11% year-on-year increase in output in the third quarter of 2024, led by the electronics cluster.
Industrial property rents in Singapore continued to rise throughout 2024, with growth recorded in the first three quarters of the year. As of the third quarter, the JTC All Industrial Rental Index has seen 16 consecutive quarters of growth since the third quarter of 2020. However, compared to the 8.9% rental increase seen in 2023, the rate of growth has progressively slowed down. In terms of quarter-on-quarter growth, the index saw increases of 1.7%, 1%, and 0.3% in the first, second, and third quarters of 2024, respectively.
This slower growth is indicative of a more cautious sentiment among occupiers in an uncertain macroeconomic environment. According to data from JTC, rental transaction volumes fluctuated throughout the year, with a year-on-year decrease of 9% in the first quarter of 2024 and 5% in the second quarter. Catherine He, Colliers’ head of research for Singapore, notes that due to capital and budget constraints, occupiers have been more prudent in their decisions, valuing the flexibility to adapt to changing market dynamics.
Tricia Song, head of research for Singapore and Southeast Asia at CBRE, also points out that consolidation in the third-party logistics and e-commerce space has contributed to growing occupier resistance this year.
However, this impact has varied among different industrial segments. For instance, the multiple-use factory and warehouse segments have remained relatively resilient, recording 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 softer demand, resulting in both rental and occupancy rates decreasing by 0.3% quarter-on-quarter in the third quarter of 2024, marking the first decline in rents since the third quarter of 2020. Similarly, business park rents also declined, falling by 0.2% quarter-on-quarter in the third quarter of 2024, despite a marginal increase in occupancy rates. This decrease in rents follows a 0.1% quarter-on-quarter fall in the second quarter of 2024.
While leasing activity has been mixed, the industrial sales market saw more activity. After a quiet start to the year, the market picked up in the second quarter of 2024, with several significant transactions taking place. These include the sale of BHL Factories at 2C Mandai Estate for $74 million in May, Kian Ann Building at 7 Changi South Lane for $63 million in June, and a single-user factory at 47 Pandan Road for $36 million in April.
The market received another boost in the third quarter, with several large deals taking place, including Warburg Pincus and Lendlease Group’s joint venture’s acquisition of a $1.6 billion portfolio of seven industrial assets from Soilbuild Business Space REIT, which was owned by Soilbuild Group and Blackstone. Other significant deals included 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.
According to Alan Cheong, executive director of research and consultancy at Savills Singapore, these deals resulted in a sevenfold jump in industrial property sales to $2.45 billion in the third quarter of 2024. In a November research report, Savills attributed this leap in transactions to better sentiment due to the US Federal Reserve’s interest rate cut in September, alongside improved manufacturing sector performance.
Despite the strong performance in the last quarter, Cheong views the big-ticket industrial deals as a one-off, noting that there may still be one or two significant deals transacted in 2025, but each would probably be significantly below $1 billion.
The influx of supply coupled with weaker demand is expected to result in a supply-demand imbalance in most industrial segments, leading to slower pre-commitment and occupancy rates at upcoming and existing developments. Colliers’ He anticipates overall industrial rental growth to come in between 2.5% and 3.5%, stabilising from the 8.9% increase recorded in 2023. Similarly, price growth is expected to ease from 5.1% in 2023 to between 1% and 2% this year. In 2025, both rental and price growth may slow down further to between 0% and 2%.
Demand for multiple-use factory space, centrally located food factories, and favoured locations for logistics space remains strong, according to Savills’ Cheong. Savills projects rental growth of up to 3% for multiple-use factories, warehouses, and logistics space this year, before slowing down to between 0% and 2% in 2025.
The electronics and advanced manufacturing sectors are also expected to continue performing well and attracting investments. CBRE’s Song suggests that if the US Federal Reserve continues to cut lending rates in 2025, this could encourage more companies to deploy capital expenditures (capex) to pursue growth and expansion. Knight Frank’s Tay is similarly bullish on the semiconductor industry, which he expects to continue driving demand for industrial real estate in Singapore, supported by increasing electric vehicle and artificial intelligence requirements. The latter is also expected to support data centre expansion in the country.
On the other hand, business park rents are expected to continue facing pressure as companies downsize their footprint to cut costs or optimise their workspace in response to flexible working arrangements. Savills anticipates rents to soften by 3% to 5% this year. However, demand for newer facilities in central locations is expected to remain robust, providing some support to the segment.