Business parks and logistics see bright spot in 3Q2020
In 3Q2020, business parks continued to see demand by firms seeking costeffective spaces for their workforce, despite the weak economic sentiment in Singapore. This is highlighted by Cushman & Wakefield (C&W) in its report on the industrial property market for the quarter.
Among the movers, Tokyo-headquartered Kajima Corp started construction of its first overseas innovation centre at Changi Business Park. The firm will be investing $100 million in the property, which will span 141,000 sq ft of business park and R&D lab space.
Upon completion in 2023, the site will serve as the firm’s regional headquarters to conduct research and development into advancing built technologies for the construction industry.
Meanwhile, the logistics sector continued to expand, with German logistics firm DB Schenker opening its 550,000 sq ft warehouse at Airport Logistics
Park. The company invested $163 million in the property, ramping up the number of its warehouses in Singapore to 13, and expanding its total warehouse footprint to 2.8 million sq ft.
DB Schenker will be able to handle high order volumes with automation used in the facility that will result in a 40% speed increase in the handling of air freight imports and exports. It will also be able to cut energy usage by 35% with the use of solar panels, highlights C&W.
On the other hand, the outlook for industrial rents is mixed. C&W projects that rents for business parks in the city fringe will do well, as demand is sustained by firms seeking to cut real estate costs by moving from Grade-A offices to the city fringe. Rents of business parks in the city fringe stood at $5.91 psf per month in 3Q2020, up 0.2% from the last quarter and 2.4% from a year ago.
“Biomedical manufacturers and the related R&D players are looking to locate their facilities in Singapore or Southeast Asia as the threat of global supply chain disruptions continues to loom. Semiconductor players and all other related industries supporting 5G networks are poised for growth,” comments Brenda Ong, executive director and head of logistics & industrial at C&W.
Rents in the Science Park are expected to increase slightly due to the growth of the pharmaceutical and biomedical sector, says C&W. However, rents for business parks in other areas will decline due to the older stock in the areas, it adds.
In addition, factory rents are likely to moderate, while high-tech rents are set to remain stable, boosted by the growth of the electronics sector.
In the prime logistics space, rents are expected to increase due to a strong preference for ramp-up facilities, while rents for conventional warehouses are expected to remain flat, says the research consultancy. In 3Q2020, prime logistics rents rose by 1.5% over the previous quarter.
Investments in industrial assets have been lagging behind the numbers from a year ago, recording $446.5 million in 3Q2020, down 39% q-o-q and 89% y-o-y.
“Long-term players in the logistics sector are reluctant to sell their assets; unless the investor is a fund with a fixed fund life, there is no impetus for those with a long-term horizon to put their assets on the market, particularly when quality assets are few and far between. That, and the fact that investors are bound by sale moratoriums as regulated by the authorities, are reasons for the low levels of investment activity,” says Ong.
Over the third quarter, AIMS Apac REIT acquired a ramp-up logistics facility at 7 Bulim Street for $129.6 million. The property, which is located within Jurong Innovation District, is master-tenanted to freight forwarding and logistics firm KWE-Kintetsu World Express. —