_Industrial Market Update Q1 2023

Key Highlights

• Even though the Singapore economy expanded by 3.6% in 2022 according to the Ministry of Trade and Industry (MTI), a more pessimistic outlook can be expected in 2023 with Singapore’s Gross Domestic Product (GDP) projected to grow at a muted “0.5% to 2.5%”.
• In 2022, Singapore recorded a total of S$22.5 billion in fixed asset investment (FAI) commitments, an increment of more than 90% compared to the S$11.8 billion in 2021. Out of the total inflow, about 77.2% was for manufacturing with 66.8% contributed by the electronics sector.
• Singapore’s manufacturing sector was a key pillar of the economy during the pandemic, and now faces headwinds as a result of post-pandemic adjustments, inflation, ongoing supply chain disruptions as well as shortened business cycles in a general cloud of disruptive uncertainty. Nonetheless, the record FAI investments in 2022 particularly for manufacturing demonstrates the confidence and faith that technologically advanced and globally mobile manufacturers have in Singapore’s stability, educated workforce and modern infrastructure, setting up the platform for a compelling rebound once this business cycle turns and certainty returns to the global economy.
• The record volume of FAI investments last year should provide an uplift in Singapore’s industrial eco-system, especially in electronics with trending digitalisation, 5G and artificial intelligence driving the creation of devices and hardware that require semiconductors.
• The outlook for industrial and logistics will remain stable with cautious price and rental growth of 1% to 3% for most industrial property types in 2023, despite the deteriorating business sentiment. Due to tight supply, quality logistics spaces can be expected to increase by a greater 3% to 5%.
• Furthermore, with China’s reopening of borders, Chinese manufacturers could also be looking at alternative secure locations outside their home borders. With an aim of geographical diversification in order to mitigate the risks of production in an increasingly uncertain world, Singapore is an attractive alternative for companies to establish production facilities and headquarter functions for the region.