On December 4th, VisionPower Semiconductor Manufacturing Company (VSMC) held a groundbreaking ceremony for its new wafer manufacturing facility in Tampines. This facility, which is expected to cost US$7.8 billion ($10.5 billion), is a joint venture between Taiwan’s Vanguard International Semiconductor Corporation and the Netherlands’ NXP Semiconductors. The plant is set to begin production in 2027 and aims to produce 55,000 wafers per month by 2029, while also creating approximately 1,500 jobs.
Understanding the regulations and restrictions surrounding property ownership in Singapore is crucial for foreign investors. While condos can be acquired relatively easily, the same cannot be said for landed properties, as they are subject to stricter ownership rules. Nonetheless, the stability and potential for growth in the Singapore real estate market remain a major draw for foreign investment, despite the additional cost of the ABSD, which currently stands at 20% for first-time property buyers. In fact, many foreign investors are looking at Singapore Projects as an attractive option for investment.
However, VSMC is not the only company expanding in Singapore’s semiconductor industry. In March, Japan’s Toppan Holdings also began construction on a new factory in Jurong Lake District, which will manufacture semiconductor packaging materials. This project is estimated to be worth $450 million.
According to Leonard Tay, head of research at Knight Frank Singapore, these expansions are a response to the need for a more resilient supply chain in the semiconductor industry. He states that Singapore is a sought-after location for such investments due to its stability in the face of ongoing geopolitical tensions in other parts of the world.
The global semiconductor industry has seen a rebound in revenue, recording a 26% year-on-year increase for the first three quarters of 2024, as per research by London-based consultancy Omdia. This is in contrast to the previous year, where the industry saw a 9% decrease in revenue. This rebound has also had a positive impact on Singapore’s manufacturing sector, with output rising 11% year-on-year in 3Q2024, driven by the electronics cluster.
While industrial property rents in Singapore have continued to rise, there has been a slowing down of momentum in 2024. According to JTC, the All Industrial Rental Index rose for 16 consecutive quarters, but the rate of increase has progressively slowed. This is likely due to a more cautious sentiment among occupiers in an uncertain economic climate. However, this has had varying effects on different segments of the industrial property market.
The multiple-user factory and warehouse segments have held up well, with stable occupancy rates and rental growth. On the other hand, the single-user factory and business park segments have seen a slight dip in rents.
Despite the cautious sentiment, the industrial sales market has been more active, with several sizeable transactions taking place in 2Q and 3Q 2024. This includes the sale of BHL Factories, Kian Ann Building, and a single-user factory at Pandan Road. The market also received a boost when Warburg Pincus and Lendlease Group acquired a $1.6 billion portfolio of seven industrial assets from Soilbuild Business Space REIT in August.
Looking ahead, Singapore’s industrial property market is expected to see a slowdown in rental and price growth due to a supply-demand imbalance. The incoming supply of industrial space, combined with weaker demand, is likely to result in a softer market performance in the near future.
Demand remains strong for multiple-user factory space, centrally located food factories, and logistics space. The electronics and advanced manufacturing sectors are also expected to continue driving demand for industrial real estate in Singapore, with data centre expansion and semiconductor investments also providing support. However, the business park segment may continue to face pressure as companies adapt to flexible working arrangements.