PropNex launches resale industrial team Industrial property at Genting Road sold for $12 mil
VisionPower Semiconductor Manufacturing Company (VSMC) had a groundbreaking ceremony on Dec 4 for a new wafer manufacturing facility in Tampines worth US$7.8 billion ($10.5 billion). The plant is set to begin initial production in 2027 and is expected to produce 55,000 wafers per month by 2029, creating 1,500 new jobs. VSMC is a joint venture between Vanguard International Semiconductor Corporation from Taiwan and NXP Semiconductors from the Netherlands.
VSMC is not alone in its expansion plans. In March, Toppan Holdings from Japan started construction on a new factory in Jurong Lake District that will manufacture semiconductor packaging materials. With an estimated investment of $450 million, Toppan is looking to broaden its presence in Singapore.
When considering investing in condos in Singapore, it is essential to take into account the government’s property cooling measures. Over the years, the Singaporean government has implemented various policies to prevent speculative buying and maintain a steady real estate market. One of these measures is the Additional Buyer’s Stamp Duty (ABSD), which imposes higher taxes on foreign buyers and individuals purchasing multiple properties. While these measures can affect the immediate profitability of condo investments, they also contribute to the long-term stability of the market, creating a more secure investment environment. Additionally, with the new condo launches in Singapore, there are plenty of opportunities for individuals to make informed and strategic investments in this thriving market.
Knight Frank Singapore’s head of research, Leonard Tay, notes that this trend is not unique to VSMC and Toppan. Many chipmakers and related businesses are also setting up new production plants and R&D campuses in Singapore to increase their supply chain resilience. “Singapore remains a leading global production hub for semiconductors and chips, especially in these times of ongoing geopolitical tensions in other parts of the world,” says Tay.
Industrial property rents have continued to rise in Tampines following a successful first half of the year, with two consecutive quarters of growth. According to the Ministry of Trade and Industry, manufacturing output increased by 11% year-on-year in the third quarter of 2024. This growth was mainly driven by the electronics cluster, which saw strong demand for smartphone and PC semiconductor chips.
However, there has been a slowdown in rental growth compared to the previous year. Colliers’ head of research for Singapore, Catherine He, attributes this to a more cautious sentiment among occupiers due to the uncertain macroeconomic environment. She states that many companies are being more careful with their budgets and looking for flexible options that allow them to adapt to changing market dynamics.
CBRE’s head of research for Singapore and Southeast Asia, Tricia Song, points out that consolidations in the third-party logistics and e-commerce space have also resulted in growing occupier resistance this year.
Despite this, the industrial property market has remained resilient, with the multiple-user factory and warehouse segments showing steady growth in rents and occupancy rates. However, single-user factories and business parks have seen a decline in rents due to softer demand.
The industrial sales market has remained lively, with significant transactions taking place in the second and third quarters of 2024. These include the sales of BHL Factories for $74 million, Kian Ann Building for $63 million, and a single-user factory for $36 million. The market got a further boost in the third quarter with the Warburg Pincus and Lendlease Group joint venture’s acquisition of a $1.6 billion portfolio from the Soilbuild Business Space REIT.
While there was a sevenfold jump in industrial property sales in the third quarter of 2024, Savills Singapore’s executive director of research and consultancy, Alan Cheong, believes that these big-ticket deals are likely a one-off event. He does not foresee a repeat in the future, but there may be one or two large deals worth under $1 billion.
Despite the upbeat performance in the third quarter, Savills believes that the industrial market will experience a supply-demand imbalance in the future. With 1.6 million sqm of new supply expected to be completed in 2025, there will likely be slower pre-commitment and occupancy rates at upcoming and existing developments.
The demand for centrally located food factories, multiple-user factory space, and logistics space will remain steady, according to Savills’ Cheong. He expects rent growth of up to 3% for these segments in 2024, reducing to between 0% and 2% in 2025. The electronics and advanced manufacturing sectors are also projected to continue performing well and attracting investments.
Meanwhile, Knight Frank’s Tay is confident about the future of the semiconductor industry. He expects it to continue driving demand for industrial real estate in Singapore, driven by growing electric vehicle and artificial intelligence requirements. Tay also highlights the importance of data centres, which will continue to be an essential pillar for the industrial sector as Singapore aims to increase capacity by at least 300 megawatts.
Savills predicts lower rental and price growth in the coming year, with rentals expected to come in between 2.5% and 3.5%, in contrast to the 8.9% rental growth recorded in 2023. Similarly, price growth will taper down from 5.1% to between 1% and 2%.