_Singapore: Stronger manufacturing outlook driving support for high-specification industrial spaces

Singapore’s economy registered a 5.2% growth y-o-y in Q3 2017, with the manufacturing sector leading the increase at a growth rate of 18.4% y-o-y. The growth was broad-based, with all manufacturing clusters recording output expansions, except for the transport engineering cluster. The stronger manufacturing outlook is also driving support for high-specification industrial spaces, as industrialists look to more customised spaces to suit their operational needs. 

For instance, the opening of YCH’s new Supply Chain City in Jurong West features an Automated Storage and Retrieval System with a fully ramped-up warehouse that can reduce the retrieval time of a pallet from over three minutes to just ten seconds. Along with inventory-counting drones and advanced robotics, the facility can help increase efficiency of logistics players in the market. 

Also, as industrialists are faced with more alternatives for industrial spaces due to higher new supply coming onstream in the short term, overall rents and prices for leasehold industrial units are expected to remain subdued for the next two quarters. Based on Knight Frank Research basket of industrial properties, average monthly gross rents maintained for Q3 2017 at S$1.98 psf.

Exhibit 1: Average Monthly Gross Rentals for Conventional Industrial Space by Cluster

Source: Knight Frank Research
Note: Rentals are based on Knight Frank’s basket of industrial properties, which are monitored every quarter.
*Range of rentals is estimated based on the average of minimum and maximum rentals derived.

The prospect of improving economic growth for Singapore could provide support to overall demand for industrial properties, albeit for well-located and higher-specification spaces as economic restructuring continues. 

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