On December 4, VisionPower Semiconductor Manufacturing Company (VSMC) held a groundbreaking ceremony for its new $7.8 billion wafer manufacturing facility in Tampines. The plant, which is expected to start initial production in 2027, will produce 55,000 wafers per month by 2029 and create around 1,500 jobs. VSMC is a joint venture between Taiwan’s Vanguard International Semiconductor Corporation and the Netherlands’ NXP Semiconductors, with a 60:40 stake.
However, VSMC is not the only company expanding in Singapore. In March, Japan’s Toppan Holdings began construction on a factory in Jurong Lake District that will produce semiconductor packaging materials. The project, estimated to cost $450 million, is expected to be completed in the near future.
According to Knight Frank Singapore’s head of research Leonard Tay, many chipmakers and related businesses are setting up manufacturing plants and research and development campuses in Singapore in order to strengthen their supply chain resilience. He states that “Singapore remains a global production hub for semiconductors and chips due to its stability amid ongoing geopolitical tensions in other parts of the world.”
The global semiconductor industry is recovering from a downturn in 2023, with a 26% year-on-year increase in revenue for the first three quarters of 2024, according to research by London-based consultancy Omdia. This is a reversal from the previous year when revenue fell by 9%. As a result, Singapore’s manufacturing sector has experienced significant growth, with a 11% year-on-year increase in output in the third quarter of 2024, driven by strong demand for smartphone and PC semiconductor chips.
However, the rental growth in Singapore’s industrial property market has slowed down, with a 1.7% quarter-on-quarter increase in the third quarter of 2024, compared to a 8.9% increase in 2023. According to Catherine He, Colliers’ head of research for Singapore, this is due to cautious sentiment among occupiers and their preference for flexible workspace solutions in response to the uncertain macroeconomic environment.
The industrial sales market, on the other hand, has been more active, with several large transactions taking place in the second and third quarters of 2024. These include the sale of BHL Factories, Kian Ann Building, and a single-user factory at Pandan Road.
Despite a jump in transactions in the third quarter, Savills Singapore’s executive director Alan Cheong believes that these are likely to be one-off occurrences. Cheong states that “each [large deal] would probably be significantly below $1 billion” in the future. Furthermore, the influx of new supply, particularly in the single-user factory and warehouse segments, is expected to create a supply-demand imbalance, leading to slower pre-commitment and occupancy rates in upcoming and existing developments.
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However, there are still strong demand drivers for multiple-user factory space, centrally-located food factories, and logistics space, notes Savills’ Cheong. The electronics and advanced manufacturing sectors are also projected to continue driving demand for industrial real estate in Singapore, along with data centre expansion and the government’s plans to increase capacity by 300 megawatts as part of the Green Data Centre Roadmap launched in May 2024.
While business park rents may face pressure in the near future due to the decrease in demand for office space, demand for newer facilities in central locations is expected to remain strong. In conclusion, while the growth of Singapore’s industrial property market may be slowing down, there are still significant opportunities for investors and businesses in the sector.