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THINK Singapore: Long-term growth story underpins case for logistics

THINK Singapore

Harry Tan (Head of Research, Asia-Pacific) studies the economic outlook for Singapore and how it relates to investment opportunities in the country’s logistics market.

Whilst its exposure to global economic markets paints an uncertain near-term future for Singapore, its success over the past 50 years provides strong evidence that the current economic restructuring efforts will underpin healthy long-term growth. Its policy makers deploy both innovative and effective economic strategies that have, so far, helped to deliver rapid growth, improve social welfare and cemented it as one of the most competitive economies globally.

It is off the back of these predictions for long-term growth and other strong fundamentals such as, connectivity, strong occupancy and long term-demand prospects, that TH Real Estate supports the case for investment in the logistics sector in Singapore. The city is one of the most interconnected and strategically located cities in the world. It boasts the second busiest container port behind Shanghai, the 13th and 17th busiest airport measured by cargo freight and passenger traffic, and is the fourth and ninth most competitive financial and manufacturing centre, respectively, globally.

In addition to its strong location, Singapore adopts a comprehensive approach to the development of services, infrastructure and policies, with a strong focus on industry consultation and collaboration. Unsurprisingly, it is host to major logistics firms, with 20 of the top 25 global logistics players, like DHL, Kuehne + Nagel, Sankyu, Schenker, Toll, UPS and Yusen Logistics, having set up regional or global headquarter functions there. As such, it has a strong occupancy rate of approximately 90%.

Supply in Singapore currently stands at circa 400,000 sq m (4.3m sq ft) compared to the 10-year average of 350,000 sq m (3.76 sq ft), which is resulting in higher vacancy rates, at approximately 8%. However, supply pressures are expected to ease over the next three years, which will provide breathing space for stabilisation and an upward adjustment in rents. It is also noteworthy that even amidst the strong development pipeline over the past three years, demand has kept apace helping to keep a lid on rising vacancy.

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Harry Tan

Harry Tan

Head of Research, Asia Pacific

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