On December 4, VisionPower Semiconductor Manufacturing Company (VSMC) broke ground on a new US$7.8 billion ($10.5 billion) wafer manufacturing facility in Tampines. This plant is expected to produce 55,000 wafers per month by 2029 and create approximately 1,500 new jobs. VSMC is a joint venture between Taiwan’s Vanguard International Semiconductor Corporation and the Netherlands’ NXP Semiconductors.
But VSMC is not the only company investing in Singapore’s semiconductor industry. In March, Japan’s Toppan Holdings began construction on a factory in Jurong Lake District that will produce semiconductor packaging materials. The estimated investment for this project is $450 million.
According to Leonard Tay, head of research at Knight Frank Singapore, many chipmakers and related businesses are choosing to set up new production plants and R&D campuses in Singapore to enhance their supply chain resilience. He also notes that Singapore continues to be a global production hub for semiconductors and chips due to its stable economy amidst ongoing geopolitical tensions in other parts of the world.
The global semiconductor industry is currently on the rebound after a downturn in 2020 due to softer demand and higher supply. Research by London-based consultancy Omdia shows a 26% year-on-year increase in revenue for the first three quarters of 2024, a reversal from the 9% year-on-year decrease in 2023. This rebound has had a positive impact on Singapore’s manufacturing sector, which saw an 11% year-on-year growth in output in the third quarter of 2024, led by the electronics cluster.
However, the industrial property market in Singapore has not seen the same level of growth. While industrial rents have been rising steadily since 2020, the pace of growth has slowed down. In the first three quarters of 2024, the JTC All Industrial Rental Index grew by 1.7%, 1%, and 0.3% respectively. This is in contrast to the 8.9% rental increase seen in 2023, indicating a more cautious sentiment among occupiers in light of the uncertain macroeconomic environment.
According to Catherine He, Colliers’ head of research for Singapore, occupiers have been more prudent with their spending due to budget constraints, placing a high value on flexibility in response to the changing market dynamics. Tricia Song, head of research for Singapore and Southeast Asia at CBRE, also notes that consolidation in the logistics and e-commerce space has contributed to growing occupier resistance.
Despite this, the industrial sales market has been more active, with several large transactions taking place in the second and third quarters of 2024. These include the sales of BHL Factories at 2C Mandai Estate for $74 million in May and Kian Ann Building at 7 Changi South Lane for $63 million in June. In the third quarter, a joint venture between Warburg Pincus and Lendlease Group acquired a $1.6 billion portfolio of seven industrial assets from Soilbuild Business Space REIT. This increased the industrial property sales to $2.45 billion in the third quarter of 2024, a significant increase from the previous quarters.
However, with the incoming supply of new industrial properties expected to nearly double the average annual supply in the past three years, there is likely to be an imbalance between supply and demand. As a result, rental and price growth for industrial properties are expected to slow down in the near term. Business park rents may face the most pressure, as companies downsize their workspace or use more flexible arrangements in response to the pandemic.
Nevertheless, demand for multiple-use factory space, centrally located food factories, and logistics space is expected to remain strong. The electronics and advanced manufacturing sectors are also likely to continue performing well and attracting investments. Additionally, the growth of data centers will be a significant factor in the industrial property market, as Singapore plans to increase their capacity by at least 300 megawatts by 2024. On the other hand, business park rents may continue to face pressure as companies adapt to flexible working arrangements.
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The bustling cityscape of Singapore is a testament to its cutting-edge architecture and modern amenities. Among the many dazzling developments,
Overall, the industrial property market in Singapore is expected to stabilize in 2025, with slower rental and price growth compared to previous years.