_Q2 2023 Industrial Statistics from JTC
Singapore’s manufacturing sector remains in the doldrums with manufacturing output data from the Economic Development Board showing a fall of 4.9% y-o-y in June 2023. Based on advanced estimates by the Ministry of Trade and Industry (MTI), the manufacturing sector shrank 7.5% y-o-y and 1.3% q-o-q, recording a second straight quarter of contraction. Despite the seemingly gloomy manufacturing sector, industrial real estate prices and rents remained stable, even chalking up slight improvement in Q2 2023 based on data just out from JTC, as the all-industrial price index increased 1.5% q-o-q and 6.9% y-o-y, while the rental index expanded by 2.1% q-o-q in Q2 2023 to register a gain of 9.4% y-o-y. Both the all-industrial price and rental indices have risen for 11 consecutive quarters now, since Q4 2020, with the industrial real estate sector demonstrating a resilience in the face of global economic uncertainties and disruption in demand for exports.
The overall occupancy rate was stable with a slight increase from 88.8% in Q1 2023 to 89.1% in Q2 2023, a 0.3 percentage point (pp) improvement. Although most manufacturing clusters contracted in June, occupancy levels were supported by demand from the transport engineering cluster. Persistently strong demand for the storage of inventory and material due to global supply chain disruptions, coupled with the shortage of quality warehouse spaces and facilities contributed to the 0.7 pp increase in occupancy for warehouses to 91.0% as rents moved up 1.4% q-o-q in Q2.
Despite the gloom in the manufacturing sector, stability for most property types in the industrial real estate market can be expected for the rest of 2023, as witnessed in the past 11 quarters, notwithstanding the pandemic. Based on the JTC indices, prices and rents in the first six months of 2023 have already strengthened by 3.1% and 4.9% respectively, surpassing Knight Frank’s initial projections of 1% to 3% for the entire year. Industrial prices and rents should remain relatively stable for the rest of the year. As a modern, neutral and innovative business hub, Singapore's fundamentals offer international firms a flight-to-safety and flight-to-quality destination for investment and expansion that will facilitate growth when stability returns to the global economy.
Singapore is an attractive location for international firms to expand their manufacturing operations. Given Singapore’s access to talent, proximity to the rest of the Southeast Asian market, political and legal stability, free trade agreements with many countries, and a government-led emphasis on sustainability, global manufacturers continue to invest and prepare as they wait for stability to return to the world economy and for China to recover from the aftereffects of the pandemic. Siemens will build a new high-tech factory estimated to cost S$290 million for its industrial automation division that is set to open by 2026, and Procter & Gamble (P&G) announced the construction of a new manufacturing plant that is expected to cost more than S$100 million. Cell therapy firm Biosyngen opened a 16,146-sf cell manufacturing plant at Tai Seng Avenue, while Finnish energy giant Neste expanded its Tuas South refinery that can now produce up to a million tonnes of sustainable aviation fuel annually. British drugmaker GSK expanded their vaccine facility in Tuas with a S$300 million injection, and Thermo Fisher launched a new sterile drug factory in May. Other firms have also unveiled redevelopment plans to meet the high demand for quality industrial spaces, especially for warehousing purposes. For example, Boustead Projects will be redeveloping 36 Tuas Road by maximising the plot ratio of the property to better support demand for high-quality logistics and warehousing facilities.