Bolstered by increasing biotech investments and accelerating healthcare research, the biomedical sciences (BMS) industry has experienced strong growth in recent years, further reinforcing Singapore’s position as a leading biomedical science hub at the heart of Asia. According to Cushman & Wakefield’s latest report titled “Biomedical Sciences: A Niche Asset Class with Strong Growth Prospects”, BMS rents surged in the last two years, and the industry is looking to continue its growth trajectory in and beyond 2022.
“Given that innovation will be a key driver of the new economy, Singapore has continued to invest and nurture start-ups in the biotech sector which is rich in intellectual property and deep in technology. This is evidenced by the rapid growth of biotech start-ups over the past decade. In 2018, there were 100 home-grown biotech companies in Singapore, a 26.6% increase compared to 79 in 2017,” said Wong Xian Yang, Head of Research, Singapore at Cushman & Wakefield.
The rise in BMS demand and limited supply of quality BMS lab space has created a mismatch in demand and supply. The future supply of BMS lab space looks tight. Only two new major multi-user BMS developments will enter the market in the near term, namely Solaris @ Tai Seng (Estimated Completion: H2 2022) and Elementum (Estimated Completion: H2 2023). Over the longer term, new BMS supply will come from the redevelopment of 1 Science Park Drive, which is scheduled for completion in 2025.
Strong rental growth underpinned by robust demand and tight supply
Given tight occupancies and buoyant demand due to the pandemic, BMS rents at Biopolis and Science Park surged during 2020 and 2021. Biopolis can command higher rents and stronger rental growth compared to Science Park due to its newer infrastructure and the clustering of biomedical firms, creating a vibrant ecosystem for research and collaboration.
“In 2021, BMS rents in Biopolis and Science Park increased by 5.7% and 3.5% yoy, respectively, to reach about S$6.13 and S$4.39 psf pm. This extended the rental growth of 5.5% and 3.5% yoy in the previous year for BMS spaces at Biopolis and Science Park, respectively,” said Brenda Ong, Executive Director, Logistics & Industrial at Cushman & Wakefield. “Going forward, rents of business park space for the BMS industry are expected to continue to trend upward by around 3.0% per annum, supported by healthy demand.”
Other takeaways for biomedical sciences industry:
The BMS industry will continue to reinforce its role as a key fourth pillar of the nation’s manufacturing economy.
- Significant increase in public sector funding to fuel growth: The Research, Innovation and Enterprise (RIE) 2025 Plan will channel S$25 billion into research and innovation. This represents a 32% increase compared to RIE2020, when the government committed S$19 billion – a testament to the government’s commitment to establish Singapore as a global research and development hub.
- Potential conversion of industrial properties into BMS-ready developments: Continued growth in BMS rents would entice landlords or investors to convert parts or all existing developments into BMS-ready developments, accommodating the rising demand for BMS space. Investors or landlords looking to jump on the life science bandwagon via conversion of existing industrial spaces, would see more opportunities at Business Parks or B2 spaces.
- The growth of food tech driving up demand for space: With the city-state’s “30 by 30” goal of producing 30% of its nutritional needs locally by 2030, Singapore is transforming itself into the food tech hub of Asia given its land scarcity for intensive farming activities. MNCs and start-ups from around the world have set up their facilities here to take advantage of the emerging trends on the back of strong governmental support for the sector.
- Prevailing megatrends to drive increased pharmaceutical spending over next decade: The growth of Asia’s pharmaceutical markets would be further boosted by prevailing mega trends, which includes an emerging middle class in Asia, increasing populations, ageing societies, and political pressure to expand healthcare services. These factors would lead to increases in drug purchases, driving pharmaceutical market growth. Though most of this growth will occur in the region’s large emerging markets, each country is expected to see a compound annual growth (CAGR) of 5-10% from 2018 to 2022. Singapore is poised to ride this wave of growth given its position as a biomedical hub in Asia Pacific.
- Major biomedical clusters in Singapore continue to grow: There are currently a few biomedical clusters located across several parts of Singapore, with different regions catering to varying business needs of tenants in the BMS industry. Singapore’s western region is the main location for biomedical manufacturing and R&D activities. While the city centre area accommodates front office and business functions, developments at the city-fringe such as Science Park and Biopolis are where R&D operations are situated, and where business and HQ functions of biomedical companies are concentrated.
- Healthy demand for lab space: Demand for BMS space was already robust before the pandemic, evidenced by the strong demand for Biopolis and its consistently healthy occupancy rates in recent years. This demand remains strong into 2021, with Nucleos occupancy rates estimated to be around 98% at the end of the year. Space at Biopolis remains highly sought after with new BMS tenants such as ADM which opened their plant-based laboratory at Nucleos and A*STAR Infectious Diseases (ID) Labs at Immunos.
- Current pipeline looks tight, but more asset conversions could be in the works: The sudden boom in demand seen for this segment and limited supply of quality BMS lab space has created a mismatch in demand and supply. Hence, the future supply of BMS lab space remains relatively limited.
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