Figure 3.2: URA Rental Trend
(Single and Multiple-user Factory)
Outlook
While outlook of most manufacturing clusters in Singapore is
expected to be subdued, that for the biomedical manufacturing
industry is expected to be relatively optimistic. In particular,
the export demand in the medical technology segment is
strong and there are plans to introduce new products in the
pharmaceuticals segment. The biomedical cluster will also
experience healthy capital investments over the next five years.
For instance, in July 2015, Japan’s Chugai Pharmaceutical
announced a $355 million investment by 2021 to increase its
research and development capabilities in Singapore.
Taking the overall weaknesses and pockets of opportunities
in the manufacturing sector into consideration, private
light industrial rents are expected to decline by 8% to 10%
in 2016. However, with only 10.1% of occupiers being in
manufacturing activities in 2015, the rents in the A-REIT
portfolio is likely to be more resilient.
Subject to the URA 60:40 rule for industrial properties
11
,
high-spec industrial spaces are lower cost alternatives
for ancillary offices. Despite limited potential supply of
high-specs industrial space in the next three years, rentals
are expected to decline by between 4% and 6% in 2016.
While short-term challenges in industrial sector are present,
medium-to-longer term outlook for high-spec industrial are
positive as Singapore transforms itself to a future hub for
value-adding and value-creating industries with the growth
of Infocomm industry and data centres.
By end-2015, the total number of data centres in Singapore
rose to more than 50. This has positioned Singapore as the
leading data centre hub of Southeast Asia, a result of robust
infrastructure, strong connectivity, and policies and initiatives
by the Government to propel Singapore to be a global-
Asia tech hub. According to the Infocomm Development
Authority of Singapore, Singapore currently accounts for
about 60% of data centre capacity in Southeast Asia.
Rents
10
Weak market conditions led to companies downsizing their
production capacity. Coupled with the tightening labour
supply, industrialists were more cost-sensitive and cautious
on their space requirements. The URA median rental, a proxy
of private light industrial rent, fell by 3.1%, from $1.95 per sq
ft ($21 per sq m) in 2014 to $1.89 per sq ft ($20 per sq m) in
2015. Meanwhile, the 75
th
percentile rental, a proxy of high-
specs industrial rent, experienced a decline of 3.3%, easing
from $2.39 per sq ft ($26 per sq m) in 2014 to $2.31 per sq ft
($25 per sq m) in 2015 (Figure 3.2).
10 The 75
th
percentile monthly rentals for multiple-user factory space were used as a proxy for high-specs industrial rental trends, while the median rentals for
multiple-user factory space were used as a proxy for light industrial rental trends.
11 Under the URA 60:40 rule for industrial properties, 60% of the property’s Gross Floor Area (GFA) should be used for industrial activities (e.g. manufacturing,
warehousing and storage). The remaining 40% can be used for ancillary offices, showrooms, neutral area and common facilities.
Figure 3.1: Net Supply, Demand and Occupancy
(Single and Multiple-user Factory)
76.0%
82.0%
90.0%
80.0%
86.0%
95.0%
92.0%
84.0%
88.0%
100.0%
98.0%
96.0%
74.0%
78.0%
0
400
200
600
800
1,000
1,600
1,800
2,000
‘000 sq m
1,200
1,400
Net Supply (LHS)
Demand (LHS)
Occupancy (Single-user) (RHS)
2008
2006
2010
2012
2009
2007
2011
2013
2015
2016
2017
2018
2014
Occupancy (Multiple-user) (RHS)
Source: URA, JTC, DTZ Consulting & Research, March 2016
91.9%
86.3%
Average Annual Net Supply (2006 to 2015): 871,000 sq m
Average Annual Demand (2006 to 2015): 785,000 sq m
0.0
0.5
1.0
1.5
2.5
3.0
$ per sq ft per month
2.0
2008
2006
2010
2012
2009
2007
2011
2013
2015
2014
Median Rent (Light Industrial)
75th Percentile Rental (High-specs Industrial)
Source: URA, DTZ Consulting & Research, March 2016
.79
A-REIT ANNUAL REPORT
2015/2016
