_Q1 2023 JTC Industrial Statistics
The manufacturing sector is currently going through a rough patch with manufacturing GDP growth contracting 6.0% y-o-y based on advanced estimates from the Ministry of Trade and Industry. Nevertheless, industrial real estate prices and rents continued to remain on an even footing with a slight improvement in early 2023. In the first quarter 2023, the all-industrial price index increased by 1.5% q-o-q with a full year increment of 6.9%, while the rental index expanded by 2.8% q-o-q in Q1 2023 to chalk up 8.8% y-o-y.
The rise in industrial prices and rents in Q1 2023 continued to be supported by new, innovative, and diverse manufacturing activities that have started operations or are planning to, injecting vitality amid the deteriorating manufacturing and exports outlook. For example, the Hyundai Motor Group Innovation Centre started operations at Jurong in April 2023 with the production of electric vehicles – Singapore’s first vehicle assembly plant in more than 40 years – and a first-of-its-kind in Singapore glass recycling plant operated by Abraclean that repurposes glass waste into new products at an over 170,000 sf facility in Pioneer. Esco Aster, a cell-based meat manufacturer, will set up an 80,000 sf facility in Changi, while Commonwealth Kokubu Logistics (CKL) broke ground on a S$200 million 500,000 sf cold-chain food logistics facility at Jalan Besut.
Both these facilities are expected to be ready in 2025. 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 and 66.8% was contributed by the electronics sector, as international manufacturers invest in Singapore’s business environment of stability.
However, with new industrial real estate completions causing the total available stock to rise by 3.8 million sf, and against net new demand of just about 54,000 sf, the overall industrial occupancy rate shrank 0.6 percentage points from 89.4% to 88.8%.
The months ahead for the rest of 2023 is going to be difficult for the manufacturing sector. Industrial production in March 2023 fell 4.2% y-o-y, representing a sixth straight month of contraction with a turnaround only expected sometime in the second half of the year at the earliest. About 10.3 million sf of industrial space is expected to be completed throughout 2023, with 6.3 million sf or 61.5% comprising single-user factory space, typically developed by the manufacturers for their own use. New warehouses make up 2.2 million sf, and this would provide much needed logistics space, alleviating some of the tight supply in the market.
Therefore, the pace of industrial price and rent growth will likely moderate in the next couple of quarters, even though a marginal growth of 1% to 3% (for both prices and rents) can be expected for the whole of 2023, after weathering headwinds in the first six to nine months of the year. Nonetheless, the record FAI investments in 2022 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. This could happen in 2024, once the business cycle turns and certainty returns to the global economy.