Industrial property at Loyang Way for sale at $12 mil
On December 4, VisionPower Semiconductor Manufacturing Company (VSMC) made a significant move by commencing construction on a new wafer manufacturing facility in Tampines worth US$7.8 billion ($10.5 billion). This joint venture between Taiwan’s Vanguard International Semiconductor Corporation and the Netherlands’ NXP Semiconductors is slated to begin initial production in 2027 and is expected to produce 55,000 wafers per month by 2029. This project also holds the potential to generate around 1,500 job opportunities.
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VSMC is not the only player expanding in Singapore’s industrial sector. In March, Toppan Holdings from Japan started construction on a new factory in Jurong Lake District that will produce semiconductor packaging materials. This project is estimated to have a budget of $450 million.
According to Leonard Tay, head of research at Knight Frank Singapore, this trend of new production plants and R&D campuses being set up in Singapore by chipmakers and other related businesses is primarily driven by the need to boost the supply chain’s resilience. He further adds that Singapore’s stability in the face of ongoing geopolitical tensions in other parts of the world makes it a global production hub for semiconductors and chips.
The semiconductor industry has been facing a downturn since 2023 due to soft demand and increased supply. However, a recent report by London-based consultancy Omdia shows a 26% year-on-year increase in revenue for the first three quarters of 2024, signaling a rebound. This has also contributed to the growth of Singapore’s manufacturing sector, which recorded an 11% year-on-year expansion in the third quarter of 2024. The electronics cluster led this growth, driven by the high demand for smartphone and PC semiconductor chips.
Although industrial property rents in Singapore continued to rise throughout 2024, the pace has significantly slowed down compared to the previous year. According to data from the Ministry of Trade and Industry, the JTC All Industrial Rental Index has recorded a 1.7%, 1%, and 0.3% quarter-on-quarter growth in the first, second, and third quarters, respectively. This trend is indicative of a more cautious sentiment among occupiers due to an uncertain macroeconomic environment and budget constraints.
Additionally, there has been a mixed response from occupiers towards industrial leasing, with some showing resistance due to consolidation in the third-party logistics and e-commerce space. However, segments such as multiple-user factory and warehouse space have remained relatively resilient, with rental growth supported by stable occupancy rates. On the other hand, the single-user factory segment saw a decline in both rents and occupancy in the third quarter, while business park rents also dipped despite a slight increase in occupancy.
In terms of industrial property sales, there has been a considerable increase in activity in the third quarter following a slow start to the year. Several significant transactions took place, including the sales of BHL Factories, Kian Ann Building, and a single-user factory at 47 Pandan Road. The market also witnessed a sevenfold jump in industrial property sales to $2.45 billion in the third quarter. However, Alan Cheong, executive director of research and consultancy at Savills Singapore, believes that this is likely a one-off and may not be repeated in 2025.
Looking ahead, the incoming supply of industrial space is expected to outpace demand, leading to a supply-demand imbalance and slower rental and price growth in the near term. However, certain segments such as multiple-user factory, centrally located food factories, and logistics space are expected to remain in high demand, driven by the electronics and advanced manufacturing sectors. Demand for data centers is also likely to support the industrial sector, with plans to increase capacity by at least 300 megawatts as part of the Green Data Centre Roadmap launched in May 2024.
In conclusion, although the industrial property market in Singapore may face some challenges in the near future, it remains a key global hub for the semiconductor and chip industry, offering stability and resilience amid geopolitical tensions. The sector is also expected to benefit from the growth of other industries such as data centers, providing opportunities for investors and companies alike.