Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}

Industrial Rents for Most Micro Markets to Moderate in 2020

15/04/2020
The industrial sector is facing unprecedented challenges as the COVID-19 pandemic has disrupted supply chains due to lockdowns across the world. Global demand is contracting, taking a severe toll on the local manufacturing sector. Industrial rents for most segments are projected to moderate in 2020. Location will play a big factor in determining rental growth of different micro markets during this period. Factory rents and better quality industrial buildings, by virtue of being located in outlying locations, are expected to be more affected by the Covid-19 situation. The majority of firms have been observed to have shelved their plans to relocate and proceed to renew the current lease instead, as businesses are unwilling to allocate any additional capex during this period. As a result, Cushman & Wakefield anticipates the volume of new leases to fall. On a more optimistic note, the degree of rental moderation for warehouse rents is likely to be lower due to increased e-commerce activity and deliveries.

Christine Li, Head of Research, Singapore and Southeast Asia said “Covid-19 has brought about unprecedented growth in e-commerce activity as a result of controls on people movement on a massive scale. Given the increased demand for delivery of online purchases of fresh food, medical supplies and general essential purchases, cold chain logistics facilities will probably register heightened leasing activity moving forward.”

Positive Developments Despite Sombre Market

While the tone in the market was sombre due to the spread of the COVID-19 pandemic, there were nevertheless several positive developments during the quarter. In January, GrabFood launched its first cloud kitchen at Lam Soon Industrial Building. Spanning 6,000 sf, the centralized facility will enable F&B players to serve new areas by renting cooking space without setting up a restaurant.

In addition, German event organizer Deutsche Messe signed a memorandum of understanding with the Singapore Tourism Board and SingEx to host flagship manufacturing trade show Industrial Transformation Asia-Pacific in Singapore for the next five years. This will enhance and accelerate the adoption of Industry 4.0 technologies in manufacturers across Asia-Pacific. In addition, Deutsche Messe will set up its regional headquarters in Singapore due to the strategic geographical location and strong MICE ecosystem here.

Despite the plunge in oil prices, ExxonMobil has taken a long-term view and committed a multi-billion dollar investment to implement new technology at its integrated refining and petrochemical complex in Singapore. Once the facility is upgraded, it will create 135 jobs and its capacity to produce high-performance lubricant base stocks and cleaner fuels will increase by 48,000 barrels per day.

Real estate investments in the industrial sector recorded the second highest transaction volume of $606.8 million, a moderate decline of 22 per cent quarter-on-quarter. The main bulk of 1Q 2020 industrial transactions came from A-REIT’s purchase of a 25 per cent stake in Galaxis, A-REIT’s Gulab sale and the Biopolis 6 price and concept tender. A-REIT’s purchase of Galaxis shows their interest and commitment to continue expanding their portfolio on business parks assets. Other transactions by A-REIT include the sale of 202 Kallang Bahru, the former Hyflux Building and the sale of 25 Changi South Street 1 to Hao Mart. These transactions were all in line with the company’s objectives to divest the assets whose head leases have expired. These sales were to end-users.

Brenda Ong, Executive Director and Head of Logistics and Industrial said “Investment sales for quality assets like business park and logistic buildings will still be of interest to many investors. For the moment, we do see a slowdown in vacant possession sales to end users as companies focus on operational issues arising from the disruptions to supply chains as a direct result of the Covid-19 situation. Many have put on hold their acquisition plans but we anticipate activity to return once the Covid-19 situation eases.”

Nevertheless, the long-term transformation of Singapore's economy is still on track and the market should see more initiatives for deep tech startups, such as pharmbio and medtech, advanced manufacturing, and agri-food tech which the government has identified in its Budget 2020 statement. Industrial and logistics play a critical role to support the growth of these sectors.

Related Insights

Q3 Greater China Capital Markets Webinar: Spotlight on Beijing
Insights • Capital Markets

Cushman & Wakefield Q3 Greater China Capital Markets Webinar: Spotlight on Beijing

As China emerges from the COVID-19 outbreak ahead of other major global economies, what’s the current status of the country’s commercial real estate (CRE) market and where is it headed?
James Shepherd • 04/11/2021
Data-Center-Update_web-card
Research • Data Center

APAC Data Centre Update

Continued growth across the reviewed markets of Hong Kong, Singapore, Sydney, Tokyo, and Jakarta collectively have 750 MW under construction.
Kevin Imboden • 18/10/2021
Super Low Energy (SLE) buildings are the way forward
Insights • Sustainability

Super low energy (SLE) buildings are the way forward

It is highly encouraging that the push for Super Low Energy (SLE) buildings is gaining traction here in Singapore. Recently, the Building and Construction Authority (BCA) noted that there is an uptick in interest from the industry to mainstream SLE buildings from 2030 onwards.
Zhenyi Lee • 18/10/2021
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Privacy & Cookies.
MORE OPTIONS
AGREE AND CLOSE
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All
SAVE SETTINGS