SINGAPORE INDUSTRIAL PROPERTIES – MORE COMPLEX THAN MEETS THE EYE

The Singapore industrial market is one which attracts less public interest than its residential cousin. However, that does not mean that this market is uninvestible. On the contrary, industrial real estate (comprising both factory and warehouse space) has been alive with activity. The only difference between this and the residential sector is that it requires greater analysis because demand for factory space and warehousing is driven by different factors. Also, government policy on the sale of government industrial land has a greater impact on the market than most of the other sectors of our local property market.

MULTIPLE AND SINGLE USER FACTOR SPACE

We will collectively call this ‘factory space’, and this analysis spans the period 2005 to 2024. Intuitively, one expects that net annual demand for this segment of the industrial market to be positively related with the annual change in GDP Manufacturing in constant dollars. Surprisingly, that relationship is found to be statistically insignificant. Graph 1 shows that insignificance. While the annual change in GDP Manufacturing in 20015 dollars has been averaging at about S$3.5 billion for the period 2005 to 2024 (Graph 2), the net annual demand for factory space has been trending down over the same period. In addition to GDP Manufacturing, by introducing rents as another explanatory variable, the results were the same; both variables were not significant to explain the decline in the net demand for factory space.