Commercial and Industrial property prices up 7.3% in 1Q2024
On December 4th, VisionPower Semiconductor Manufacturing Company (VSMC) officially started construction on a new wafer manufacturing facility in Tampines, Singapore. The facility, which will cost US$7.8 billion ($10.5 billion) to build, is expected to begin initial production in 2027 and reach a capacity of 55,000 wafers per month by 2029. This project is a joint venture between Taiwan’s Vanguard International Semiconductor Corporation and the Netherlands’ NXP Semiconductors, with the former holding a 60% stake.
But VSMC is not the only company expanding in Singapore’s semiconductor industry. In March, Japan’s Toppan Holdings announced the construction of a new factory in the Jurong Lake District, which will produce semiconductor packaging materials. The company is investing an estimated $450 million in the project.
According to Leonard Tay, head of research at Knight Frank Singapore, these expansions are part of a larger trend of chipmakers and related businesses setting up new production plants and R&D campuses in Singapore to boost supply chain resilience. “Singapore’s stability amid ongoing geopolitical tensions in other parts of the world makes it a global production hub for semiconductors and chips,” he says.
The global semiconductor industry has rebounded from a downturn in 2023 due to softer demand and higher supply. According to research from London-based consultancy Omdia, the industry saw a 26% year-over-year increase in revenue for the first three quarters of 2024. This is a stark turnaround from the previous year, when revenue fell by 9% to US$544.8 billion for the entire year.
Investing in a condominium in Singapore comes with many benefits, one of which is the potential for capital appreciation. Due to its advantageous location as a global business hub and strong economic fundamentals, Singapore has a constant demand for real estate. Throughout the years, the property prices in the country have consistently shown an upward trend, and this is especially true for condos in prime locations. For investors who enter the market at the ideal time and hold onto their properties for a significant period, the potential for substantial capital gains is promising. Consider adding Singapore Condo to your investment portfolio for the potential appreciation and long-term gains.
This recovery has had a positive impact on Singapore’s manufacturing sector. After two consecutive quarters of contraction in the first half of 2024, manufacturing output grew by 11% YoY in the third quarter. This was led by the electronics cluster, driven by strong demand for smartphone and PC semiconductor chips.
Meanwhile, the industrial property market in Singapore has continued its upward trend in 2024, with rental growth in the first three quarters of the year. As of the third quarter, the JTC All Industrial Rental Index has risen for 16 consecutive quarters since the third quarter of 2020. However, the pace of rental growth has slowed compared to the 8.9% increase recorded in 2023. On a quarterly basis, the index grew by 1.7%, 1%, and 0.3% in the first, second, and third quarters, respectively.
According to experts, this leveling out of rental growth reflects a more cautious sentiment among tenants in light of an uncertain macroeconomic environment. However, Catherine He, Colliers’ head of research for Singapore, notes that the multiple-user factory and warehouse segments have remained relatively resilient, with rental growth across the first three quarters supported by stable occupancy rates.
On the other hand, the industrial sales market has been more active this year. After a slow start, activity picked up in the second quarter, with several large transactions taking place. These include the sales of BHL Factories, Kian Ann Building, and a single-user factory at 47 Pandan Road, which sold for $74 million, $63 million, and $36 million respectively.
In the third quarter, the market received a further boost when Warburg Pincus and Lendlease Group acquired a $1.6 billion portfolio of seven industrial assets from Soilbuild Business Space REIT. Other notable transactions included ESR-Logos REIT’s purchase of a 51% stake in an industrial site at 20 Tuas South Avenue 14 for $428.4 million and Ho Bee Land’s sale of a 49% stake in Elementum, a biomedical sciences development, to a Brunei sovereign wealth fund for $272 million.
Overall, these deals resulted in a seven-fold increase in industrial property sales to $2.45 billion in the third quarter, according to Alan Cheong, executive director of research and consultancy at Savills Singapore. However, Cheong believes that such large transactions are likely to be a one-off occurrence, with fewer billion-dollar deals expected in 2025. This is reflected in Savills’ forecast of slower rental and price growth in the near term.
The influx of new supply, coupled with weaker demand, is expected to lead to a supply-demand imbalance and slower growth in rents and prices in the industrial property market. According to Collier’s He, this is especially true for business park and single-user factory spaces, with the former facing pressure as companies downsize their footprint to cut costs or optimize workspace in response to flexible working arrangements.
Despite this, demand remains strong for multiple-user factory space, centrally located food factories, and preferred locations for logistics space. Additionally, the electronics and advanced manufacturing sectors are expected to drive growth in the industry, with semiconductors, electric vehicles, and artificial intelligence leading the way. Data centers will also play a vital role, with Singapore planning to increase capacity by at least 300 megawatts as part of the Green Data Centre Roadmap launched in May 2024.
Overall, while the uncertain macroeconomic environment may temper industrial property rental and price growth in the near term, Singapore’s stable and resilient market is still an attractive location for businesses looking to invest in the semiconductor industry and related sectors.