Lacklustre manufacturing sector prompts slower industrial sales activity in 3Q2023

Singapore’s industrial sales activity in 3Q2023 has seen a decrease, with the number of deals and deal value declining 16.4% q-o-q and 13.9% q-o-q, respectively. This weakened performance is largely a result of the contraction of the manufacturing sector.

According to the Ministry of Trade and Industry (MTI) in October, the country’s manufacturing output had declined by 5% year-on-year (y-o-y) in 3Q. In August, MTI had revised down its economic forecast for 2023, projecting growth of between 0.5% and 1.5%. Economic Development Board (EDB) figures for September revealed that Singapore’s manufacturing output had dropped 12.1% y-o-y in August.

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The industrial sector has thus been affected, particularly in the area of leasing. Based on the research report by Knight Frank, leasing volume for multiple-users factories across the island fell 2.4% q-o-q to 2,461 tenancies in 3Q2023. However, there was a slight increase in industrial rents with the median rent for multiple-user factories climbing 3.7% q-o-q to $2.17 psf per month (psf pm).

The report has also revealed that signs of recovery are beginning to appear. On a q-o-q basis, the manufacturing sector in Singapore reversed from 1.5% decline recorded in 2Q2023 to edge up 0.2% in the last quarter. This information was backed up by the Business Expectations Survey of the Engineering Development Board which showed positive sentiment for the manufacturing sector in the July-December period of the year.

In addition, Singapore continues to be attractive to international industrialists. The EDB recently reported that fixed asset investment commitments for the country in 2Q2023 totalled $1.6 billion, which is a drop of 20.4% q-o-q and 75.2% y-o-y. Yet, several clusters including biomedical manufacturing and transport engineering have seen an upswing in investment commitments, illustrating Singapore’s continuing potential.

As such, Director of Knight Frank Singapore’s Occupier Strategy and Solutions, Norishikin Khalik, comments that “There are signs that the outlook by the end of 2023 will be more hopeful for manufacturing than at the start of the year, with early signals that the worst might have passed.”

Furthermore, with Singapore’s strong potential for manufacturing clusters, this poses great promise for the industrial real estate sector in the coming months.