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Fewer industrial real estate deals transacted in 4Q2022: Knight Frank

/ EdgeProp Singapore |

January 5, 2023 2:27 PM SGT

A total of $715.1 million in industrial sales were logged in 4Q2022, the lowest quarterly volume since 2Q2020 (Picture: Samuel Isaac Chua/The Edge Singapore)

SINGAPORE (EDGEPROP) - Industrial real estate investment deals saw a decline in 4Q2022, underpinned by a hazier economic outlook and weaker business sentiments, according to Knight Frank Singapore’s 4Q2022 industrial and logistics research report.

A total of $715.1 million in industrial sales were logged in 4Q2022. According to Knight Frank, this is the lowest quarterly volume since 2Q2020, when some $324.8 million in sales were recorded at the onset of the pandemic.

The most significant transactions during the quarter included the sale of Enterprise Logistics Centre, a two-storey ramp-up warehouse in Tuas, for $120.6 million in November; and the sale of two adjacent industrial sites at 10 and 12 Mandai Estate for $100 million in December. Knight Frank highlights that other transactions during the quarter were largely smaller deals, with some 97.2% of the caveats lodged in 4Q2022 representing transactions below $10 million.

The decline in transaction volume comes amid a manufacturing slowdown. In 4Q2022, GDP growth in the manufacturing sector contracted by 3%, reversing from the 1.4% growth recorded in the previous quarter. “The drop in global demand for semiconductors impacted the electronics segment, and overall declines in the chemicals and biomedical clusters stymied growth in the second half of the year,” says Norishikin Khalik, director of occupier strategy and solutions at Knight Frank Singapore.

The weaker manufacturing growth and recession concerns have clouded business sentiments. Citing Singstat’s 4Q2022 Business Expectations Survey, Knight Frank adds that more manufacturing firms surveyed anticipate a less favourable business outlook between October 2022 and March 2023 compared to the previous quarter’s survey. In addition, the Singapore Purchasing Managers’ Index (PMI), a monthly survey of material purchasing managers for private sector manufacturing firms, recorded a fourth consecutive month of contraction in December 2022.

Nonetheless, while sales activity slowed, industrial leasing transactions remained relatively stable in October and November 2022, supported by businesses in general manufacturing, construction-related manufacturing, transport engineering and precision engineering. The median rent for multiple-user factories increased by 8.7% y-o-y to $1.94 psf per month with 1,571 tenancies, says Knight Frank.

Despite headwinds, Singapore continues to attract fixed asset investment into the manufacturing sector. While manufacturing fixed asset investments declined from $3.6 billion in 2Q2022 to $411 million in 3Q2022, several new industrial facilities are in the pipeline. This includes a $600 million semiconductor plant in Tampines by Applied Materials and a $571 million extension to Soitec’s Wafer Fab Park in Pasir Ris.

Looking ahead, Norishikin anticipates industrial prices and rents to remain stable, with a marginal growth of 1% to 3% for 2023. “In the logistics segment, where supply is tight, rents for quality warehouse space might increase by 3% to 5% in the year ahead,” she adds.

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