Manufacturing rebound to pressure factory space rents

Factory space rents may increase by 1% to 3% in 2021 as renters anticipate higher demand.

With the industrial sector nursing the ailing economy during a pandemic-stricken year comes a higher demand in factory space.

According to the latest report by global think tank Knight Frank, Singapore's the volume of industrial real estate available is set to increase by 1% to 3% in the coming years as more factory space is constructed to address growing demand from the manufacturing sector.

The resilience of the manufacturing industry, particularly in electronics, biomedical manufacturing, and precision engineering, drove the economy forward in the beginning of the year.

The median rent for multiple-use factory space remained at $1.73 per square foot per month for the first few months of 2021. There was a total of 1,564 rental transactions in January and February, an uptick of 27.9% from last year's records.

Thus the multiple-user factory segment has posted a healthy stream of transactions, at approximately $324.6 m in 2021, led by the sale of the Sime Darby Business Center for $102 m.

Prices remain stable, averaging at $402 per square foot as the existing supply of investment grade multiple-user factory space is limited.

Knight Frank expects approximately 56.1 square feet gross floor area (GFA) of new industrial space to be completed from 2021 to 2024. Approximately 51.3% of the new supply is expected for completion in 2021, a significant proportion of which will go to single-user and multiple-user factory spaces.

The heightened demand for 5G technologies will continue for 5G technologies, along with the production of electronic goods due to the global chip shortage. Knight Frank expects the manufacturing sector to continue leading economic recovery.

The transport engineering cluster might turn a corner as bilateral travel corners for countries with low to moderate COVID-19 pandemic rates start easing restrictions, probably in the second half of the year.