Transactions in industrial real estate decreased in 4Q2022

Deals for investment in industrial real estate declined in the 4Q2022 period which was accompanied by a bleaker economic outlook as well as weaker business confidence, according to Knight Frank’s report for 4Q2022 on industry and logistic research study.

In total, $715.1 millions in sales from industrial companies were recorded during the 4Q2022 quarter. Based on Knight Frank, this is the lowest volume for a quarter since 2Q2020, when $324.8 million of sales were reported at the time of the outbreak of the pandemic.

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The biggest transactions in the quarter were that of the selling Enterprise Logistics Centre, a two-storey ramp-up warehouse located in Tuas in the city of Tuas, at $120.6 millions in the month of November and the purchase of two adjoining industrial sites located at 12 and 10 Mandai Estate at $100 million during December. Knight Frank highlights that other deals in the quarter were mostly smaller, with 97.2% of the caveats filed in 4Q2022 relating to transactions that were less than $10 million.

The drop in transaction volumes is accompanied by a slowdown in manufacturing. In 4Q2022, growth in GDP in the manufacturing industry slowed by 3% in contrast to prior 1.4% growth recorded in the prior quarter. “The decline in the global demand for semiconductors has impacted the electronics sector and the overall , declines in the chemicals and biomedical clusters held back development in the 2nd quarter of the year.” says Norishikin Khalik. director of strategy and solutions for occupiers in Knight Frank Singapore.

The lower growth of manufacturing and concerns about recession have weighed on business optimism. According to the Singstat 4Q2022 business Expectations Survey, Knight Frank says that more manufacturing firms are expecting a less favorable business outlook in the months between October 2022 to March 2023, compared to the prior quarter’s survey. Furthermore the Singapore Purchasing Management Index (PMI) which is which is a monthly survey of purchasing managers from private manufacturing companies and companies, reported an eighth consecutive month of decline during December of 2022.

However, even though sales declined, the number of industrial lease transactions were relatively stable between the months of November and October 2022. being supported by companies involved that specialize in general production, manufacturing related to construction transportation engineering as well as precision engineering. Median rents of multi-user factories has increased by 8.7% y-o-y to $1.94 per square foot, with 1,571 tenancies, according to Knight Frank.

Despite the headwinds, Singapore continues to attract fixed asset investment to industry. Fixed asset investments in manufacturing decreased between $3.6 billion during 2Q2022 to $411 million during 3Q2022, a number of manufacturing facilities that are new are currently in the pipeline. The most notable is an $600 million semiconductor plant located in Tampines from Applied Materials and a $571 million extension of Soitec’s Wafer Fab Park in Pasir Ris.

In the future, Norishikin anticipates industrial prices and rents to stay steady and will see a slight increase of one% up to% in 2023. “In the logistics sector in which supply is scarce renting for warehouses with high-quality space may rise up to 3% up to% in the coming year,” she adds.