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Essential goods manufacturing resilient during Covid-19: Knight Frank

By Charlene Chin

/ EdgeProp Singapore |

July 14, 2020 4:39 PM SGT

SINGAPORE (EDGEPROP) - Despite the overall contraction in Singapore’s economy due to the pandemic, some manufacturing sectors such as the production of essential goods have remained resilient, says Knight Frank in its research on the industrial market for 2Q2020.

Specifically, segments involved in the production of essential goods such as medical and hygiene-related products and the delivery of goods, as well as warehouse and logistic spaces, have mitigated the impact of the crisis on the industrial market, it says.

Singapore’s Purchasing Managers’ Index (PMI) hit a trough in April, but witnessed a slower contraction at 46.8 in May, as global demand for biomedical goods and pharmaceutical ingredients increased due to exigencies caused by Covid-19, adds Knight Frank.

In 1Q2020, Singapore’s manufacturing sector was also boosted by biomedical manufacturing, precision engineering and transport engineering clusters, outweighing the declines in the electronics, general manufacturing and chemical clusters, it says.

Meanwhile, the median rent of multiple-user factory spaces was at $1.78 psf pm in 2Q2020, unchanged from the previous quarter and from a year ago.

Leasing volume, however, declined markedly by 43.5% y-o-y, with the number of tenancies from April to May falling to 1,253, recording a rental volume of $2.5 million.

The lack of leasing activities was attributed to the “circuit breaker” measures in 2Q2020, the reduction in manpower, as well as manufacturers putting off any expansion or relocation plans due to existing headwinds.

In 2Q2020, the median prices of multiple-user factory spaces also recorded slight declines or remained flat. Transaction volume in the sector fell from $168.6 million to $62.0 million between 1Q2020 and 2Q2020.

Knight Frank expects the manufacturing sector to ramp up production cautiously as the industry prepares for higher demand with the restart of economic activity worldwide. It is bullish on the biomedical manufacturing clusters, due to increased global demand for medical-related equipment and products.

Pent-up demand for consumer goods after lockdown periods in many countries may also contribute to some increased activity in other manufacturing clusters, it highlights.

From 2Q2020 to 2024, some 54.1 million sq ft of industrial space is slated to come on stream. About 41.7% of the upcoming developments are projected to be completed in 2020, with the majority comprising factory space, notes Knight Frank.

Given the upcoming supply in 2020, as well as the weak economic outlook, the firm expects industrial rents and prices to be under pressure and moderate by about 5% this year.

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