Manufacturing sector leads economic growth expanding 10% in Q3

A Mixed Bag of Performance in manufacturing sector (Image credit: Google map)

Output growth in the biomedical manufacturing, electronics and precision engineering clusters on the back of a global boom in the semiconductor industry contributed to the expansion of the manufacturing sector

manufacturing sector
A mixed bag of performance in manufacturing sector (Image credit: Google map)

The manufacturing sector expanded by 10.0% year-on-year in Q3 2020 as Singapore’s economic performance improved, with a contraction of only 5.8% year-on-year in Q3 2020 as compared to 13.2% year-on-year in Q2 2020. Economic growth was driven by the phased resumption of activities, following the Circuit Breaker in Q2 2020.

Wong Xian Yang, Associate Director of Research for Singapore and Southeast Asia at Cushman & Wakefield said, “The manufacturing sector was the star outperformer, with the expansion largely attributed to output growth in the biomedical manufacturing, electronics and precision engineering clusters on the back of a global boom in the semiconductor industry. The Singapore’s Purchasing Managers’ Index (PMI), a key barometer for manufacturing sentiments, remains in positive territory for six consecutive months since July 2020. This bodes well for the industrial market as the manufacturing economy is showing signs of recovery.”

Demand in manufacturing sector for Good Quality Business Parks

Decentralised and high-quality business park space will be in demand, as firms explore new ways of working. The adoption of flexible working arrangements is expected to increase, supporting a flight-to-value trend. The rationale for a central office location due talent retention could weaken as the adoption of flexible working arrangement increases. Good quality decentralised business park spaces offer a credible alternative for eligible companies seeking to reduce costs.

Given the rising demand for such spaces, investors are on the look out for redevelopment or asset enhancement opportunities. For example, Perennial Real Estate Holdings recently acquired Big Box in Jurong East and obtained permission to rezone the site to business park. The redeveloped development will be renamed as Perennial Business City and will offer around 1.1 million square foot (NLA) of business park space in Jurong.

A Mixed Bag of Performance in manufacturing sector

The outlook for industrial market is mixed depending on the segment. City Fringe business parks rents have risen by 1.6% for the whole of 2020 and is expected to continue to rise in 2021, on the back of a flight-to-value trend for quality business parks. Outlying business parks rents have fallen by 5.3% in 2020, but this was mainly due to older stock in the submarket. Science park rents registered mild growth in 2020, growing 0.3% year-onyear.

Prime logistics rents which have risen by 1.7% year-on-year in 2020, will continue to outperform on the back of an e-commerce boom and preference for ramp-up logistics facilities. Also, conventional warehouses rents have largely remained resilient and grew 0.3% in 2020.

Brenda Ong, Executive Director of Logistics & Industrial at Cushman & Wakefield Singapore said, “Overall high-tech and conventional factory rents have declined in tandem with weak economic conditions. For 2021, high-tech factory rents should stabilise, bolstered by bio-medical, electronics demand. On the other hand, conventional factory rents are expected to remain weak amidst an uncertain economic recovery and a continued slowdown in construction activities.”

Industrial property market emerged one of the most resilient across the property sectors says a an analysis of JTC Q2 2020 Industrial property statistics.

Ms Tricia Song, Colliers International’s Head of Research for Singapore, commenting analysing that industrial property market emerged among most resilient sectors from the JTC Q2 2020 Industrial property statistics said:

“The Singapore industrial property market emerged one of the most resilient across the property sectors (retail, office, hotel, residential), amid the global coronavirus (COVID-19) pandemic, as seen by continued warehouse demand supported by the accelerated adoption of e-commerce and government’s stockpiling of essential goods.

“That said, overall industrial rental and price declines were more pronounced in Q2 2020 than in Q1 2020, capturing the ground sentiments and impact of COVID-19 Circuit Breaker measures which started on 7 April 2020. With the rapidly evolving COVID-19 situation, the industrial sector is likely to experience continued pressures on rents and prices, as with other sectors.

“Singapore all-Industrial property market rents declined 0.7% quarter-on-quarter (QOQ) in Q2, dragged by single-user factory. Business parks held up best but still declined 0.2% QOQ. Despite the weakness in rents, overall occupancy rate, however, rose marginally to 89.4% from 89.2%. Meanwhile, prices of industrial properties saw a decline of 1.1% QOQ, attributing largely to the 1.5% QOQ decline seen in multi-user factories.

“Overall, we are cautious about Singapore industrial market’s outlook for this year, and forecast the general industrial market to remain weak in 2020.

“The business park and high-specs segments could be more resilient, benefiting from Technology sector. Warehouses could see support from the rise in e-commerce driving demand for logistics services, and are also well-positioned for any economic rebound.”

Rents and Occupancy Rate
The All-Industrial rental index declined at an increasing rate, registering a -0.7% QOQ growth, dragged largely by single-user factory (-1.0%) and warehouse (-0.7%). This came after a 0.1% decline in Q1 2020. This also marks the highest quarterly decline since Q3 2017, and brings the All-Industrial rental index to a level at 14.2% below the peak in Q2 2014.

However, overall occupancy rates improved 0.2 percentage point (ppt) to 89.4% in Q2 2020 from 89.2% in Q1 2020, mainly due to an 0.8 ppt increase in warehouse space; more space was leased due to stockpiling and storage during the quarter. Other segments saw a decline in occupancy levels, with business parks falling the most.


The single-user factory segment saw rents declining 1.0% QOQ which helped pushed up occupancy by 0.4 ppt  to 91.1% (+0.4 ppt). While rents of multi-user factories held up slightly better at -0.5% QOQ, occupancy declined by 0.4 ppt to 87.5%. All planning regions saw a decline in rents, with the worst decline seen in the East at -2.1% QOQ.

Business Park

Business Park rents held up best among all segments, with only a marginal decline of 0.2% QOQ in Q2 2020. That said, this is the first rental decline seen for business parks since Q4 2018, as the global COVID-19 pandemic dampened business sentiment and leasing activities in business parks and high-spec spaces. Occupancy rate also declined by 0.7 ppt QOQ to 85.2% as businesses paused expansion activities and net new demand remained negative for the second consecutive quarter.


Warehouses saw a surge in net new demand to 1.3 million sq ft from -125,000 sq ft in Q1 2020, as the pandemic resulted in national stockpiling of essential goods and accelerated e-commerce growth. Lower rents (-0.7% QOQ) in Q2 2020 drove occupancy up by 0.9 ppt to 88.3%.


The All-Industrial price index fell 1.1% QOQ in Q2 2020, dragged by the multi-user factory segment which saw a -1.5% QOQ decline, while single-user factory also witnessed a -0.6% QOQ decline.

Colliers notes that the price index for multiple-user factory has not seen an improvement for seven consecutive quarters. Prices in all planning regions fell in Q2 2020, with the West and North region seeing the largest drop at -4.0% QOQ and -3.5% QOQ respectively.

Written by Ravi Chandran

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