Government measures guide development of the industrial sector
According to plan, Singapore has orchestrated a push to move the industrial sector up the value chain and scale up operations more rapidly. Building on infrastructural blueprints drawn up in the 1980s, the government has accelerated this process through recent policies including foreign labour tightening and granting of productivity incentives. On the real estate front, a land productivity grant was made available to support companies in intensifying their land-use, while incentives were also dangled to promote relocation of low value-added operations offshore. Ultimately, the country’s objective is to retain the higher value jobs and elevate overall quality of life.
Impact on industrial sub-markets becomes more apparent
Increased R&D spending has reaped clear rewards for the Business Park segment. This is demonstrated through the significant traction gained in the nation’s R&D capabilities which now span the biomedical sciences, data storage, and microelectronics sectors. Supported by favourable land planning policies, the nation has also managed to establish industry specific clusters. For instance, Biopolis caters to life sciences while Cleantech Park provides a platform for corporations to test-bed environmentally sustainable technologies. The establishment of these conducive ecosystems has also contributed to strong occupier demand for Business Park space, where the pipeline supply has observed healthy pre-commitment of between 60-70%.
Conversely, these benefits have yet to filter down to the production segment which has encountered a stumbling block in the form of increasing occupancy costs. Factory occupancy has dwindled, while certain industrialists have either scaled back operations or relocated labour-intensive functions to cheaper locations such as Malaysia and China. This downside could, however, be mitigated as more advanced manufacturers make their foray into Singapore to capitalise on our established status as a logistics hub, global financial centre and increasingly R&D hub. Evidence of this is the entrance of new industries such as data centres, and prominent firms such as Google and Pacnet setting up their facilities here.
Singapore’s Logistics Sector has remained fairly resilient, given the country’s strategic location as a gateway to Asia and presence of key 3PL players including DHL, Schenker, and UPS. Consequently, demand for logistics space has stayed healthy, with vacancy level below the 10% mark. Further improvement to this rate could also be realised following a ‘successful’ restructuring of Singapore’s manufacturing landscape, with the Logistics segment well positioned to stay ahead of regional competition by providing tailored delivery solutions for these high value-added manufacturers.
A success story in the works?
Overall, Singapore’s model of public sector-led growth has proven effective in building up its four key industries, electronics, engineering, chemical and biomedical, allowing for greater coordination and pace of development. From a real estate investment perspective, Business Park and Logistics prospects remain bullish, given the strong occupier interest in these sectors, while cost management and innovation will play a greater role in the performance of Factory space.
More on 'Logistics & Industrial' in 'Singapore'
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