Tight supply, rising rents spur interest in worker dormitory sites

Investor appetite is expanding across logistics, cold chain, and self-storage.

Industrial sites with potential for redevelopment into worker dormitories are drawing stronger institutional interest, buoyed by Singapore’s construction upcycle and persistent housing demand from foreign workers.

“Alternatives such as worker dormitories remain quite strong,” Yangliang Chua, head of research and consultancy for Southeast Asia at Jones Lang LaSalle, Inc. (JLL), told Singapore Business Review. “The state is also making significant capital investments in road improvement works and other infrastructures, ensuring steady demand for foreign workers.”

“On top of that, policy measures will continue to support the demand for worker dormitories. This is not just for construction workers, but increasingly for healthcare and other activities, which will further support this cluster of demand,” he added via Zoom.

Singapore’s construction industry is projected to grow 4.1% annually through 2029, supported by projects such as Changi Terminal 5, according to Research and Markets. That growth is already translating into pressure on worker accommodation.

The city-state had 1,441 facilities providing 439,198 beds as of end-2024, according to a report by the Dormitory Association of Singapore Ltd. and Knight Frank Singapore. Purpose-built dormitories accounted for almost two-thirds of capacity.

Occupancy remained tight at 96.7% on average, with monthly rents climbing to $390–$510 per bed, averaging $460—well above $270 before the COVID-19 pandemic. Central locations commanded the highest rents at $510 per bed.

To ease the shortage, the Ministry of Manpower announced in April that six new purpose-built dormitories would add 45,000 beds over the next six years, starting with a 2,400-bed facility at Jalan Tukang in early 2026.

“Worker’s dormitories may offer attractive returns amid the shortage of beds and construction boom, and Singapore’s reliance on foreign workers,” Catherine He, head of research at Colliers Singapore, said in an emailed reply to questions.

Beyond dormitories, investor interest is expanding across logistics, cold chain, and self-storage, Shaun Poh, Cushman & Wakefield’s executive director of capital markets, told Singapore Business Review.

“Investors are expected to show keen interest in industrial sites that offer redevelopment opportunities or can benefit from asset enhancement initiatives,” he said in an emailed reply to questions.

He added that industrial properties remain one of the best-performing segments in Singapore’s property landscape, backed by “secular tailwinds such as e-commerce, life science and the expansion of high-value manufacturing.”

Industrial yields are at 6%–7%, compared with 3.5%–4.5% for office and 4%–5% for retail, making the sector especially appealing to investors.

Alan Cheong, executive director for research and consultancy at Savills Singapore Pte. Ltd., said yields remain higher than borrowing costs, which makes the sector very attractive to foreign investors.

JLL data showed $1.9 billion in industrial transactions were recorded in the first half, or 14% of all investment sales. Major deals included CapitaLand Ascendas REIT’s $245m acquisition of 5 Science Park Drive, its $455.2m purchase of Galileo-Tele Centre, and Brookfield Asset Management’s $280m acquisition of The Strategy.

“Industrial is the stronger player in the market right now because logistics spaces as well as manufacturing spaces have continued to outperform,” Chua said.

Colliers’ He noted that many buyers acquire industrial assets for their own use, but “assets with potential for redevelopment or change of use are seeing growing popularity.”

Hotels are one example. Poh said hotels with potential for repositioning into co-living spaces are increasingly becoming attractive.

“The co-living sector is gaining traction as a preferred investment option among institutional real estate investors, who are drawn to its potential for steady and recurring income streams,” he said.

Retail properties, especially Tier 1 suburban malls near rail stations, remain another focus. Vacancy in suburban retail stood at just 5.2% as of the second quarter, the lowest among all retail submarkets.

“Investors are targeting top-tier suburban malls that offer opportunities for value-add, drawn by their stable performance and scarcity,” Poh said. JLL reported that average rents for prime suburban retail space rose 1.7% year on year in the first half to $37.72 per square foot per month.

Cheong expects retail deal activity to rise, with borrowing costs dipping into the low threes whilst yields remain above 4%. The narrowing gap is also reviving interest in offices.

“Office yields have been in the 3.25% to 3.5% range, while borrowing costs have remained well above that,” he said in a Zoom interview. “As of late, borrowing costs have fallen, and we may see some transactions in the office space moving forward.”

He added that buyers might gravitate toward strata offices, buying them for their own use.

Chua and Poh said the office market is interesting to watch given stable leasing momentum despite hybrid work. Grade A rents in the central business district (CBD) are still edging higher, with vacancy at 5.2% in the second quarter.

“Given the constrained office supply pipeline and office net yields potentially starting to exceed borrowing costs, Singapore's office market is steadily coming back onto the radar of institutional investors,” Poh said.

JLL projects just 5 million square feet of new office supply between 2025 and 2029.

“In 2026–2027, there will be very limited new supply,” Chua said. “Some larger projects are expected in 2028, but these will mostly be in the suburban areas. Over this time horizon, I believe there is potential for leases to strengthen.”

Investors should also look beyond the downtown core, he said, citing the government’s polycentric development model under the draft Master Plan 2025. Bishan, for example, has been earmarked for 2 million sq ft of office space, a polyclinic, and a new hawker centre.

“If you follow the latest Master Plan, you’ll notice an emphasis on new growth areas,” Chua said. “The government is taking a polycentric approach to urban development, with activity centers spread across the island,” he said.

This points to investment prospects beyond the downtown core. Whilst established funds may continue to concentrate on CBD assets, outlying areas also present strong potential, he pointed out.

“Investors should monitor government land sales and consider repositioning existing assets to align with the state’s long-term planning direction,” he added.