How Tuas Mega Port is charting a new course for SG's industrial property sector
As of 2Q23, total industrial stock in the West Planning Region reached 261.3 million sq ft.
Upcoming demand for Singapore's logistics and warehouse space is likely to gravitate toward Tuas and its surrounding areas, thanks to the Tuas Mega Port.
According to JLL, the port has spurred growth in the industrial property segment since its establishment was announced in 2012.
JTC data shows that initial stock in the West Planning region jumped 39% from 187.9m sq ft in 4Q12 to 261.3 million sq ft in 2Q23.
Over the same period, the Tuas Planning Area also saw a surge of more than 50% in its completed industrial stock to 78.3 million sq ft as of 2Q23, with single-user factory making up the majority (71.2%), followed by logistics/warehouse space (19.4%), and multiple-user factory space (9.4%).
From 2023 onwards, JLL believes the port will "further accelerate the momentum for synergistic real estate development and investment activities in the Tuas area."
"We foresee the spotlight to continue shining on the logistics/warehouse property segment in the lead-up to 2027, when all operations at the city terminals at Tanjong Pagar, Keppel, and Brani will have relocated to the mega port. By then, the first phase of the mega port with a handling capacity of 20 million twenty-foot equivalent units (TEUs) will also be fully operational," JLL said.
JLL said the refreshed Logistics Industry Transformation Maps (ITM) for logistics and sea transport will also catalyse demand for logistics/warehouse space.
"We expect the drive towards digitalisation and innovation, including the adoption of advanced technologies and supply chain processes, to bolster demand for higher specification (e.g. higher floor-loading capacity, higher electrical loading, and fibre optic infrastructure) logistics/ warehouse premises," JLL added.
Future demand for logistics/warehouse space, however, may not be met by Singapore's current supply, JLL warned.
Research from JLL suggests that the "estimated annual average supply of 0.2 million sq ft from 2023 to 2026 in the Tuas Planning Area is far below the 10-year annual average net absorption of 0.6 million sq ft from 2013 to 2022."
"The wider West Planning Region yields similar numbers – the estimated annual average supply of 2.3 million sq ft from 2023 to 2026, also falls short of the 10-year annual average net absorption of 2.9 million sq ft from 2013 to 2022," JLL added.
On the flip side, JLL said the limited supply pipeline could spur more industrial property owners to explore upgrading or redeveloping their ageing assets, joining the likes of Boustead Projects, Mapletree Logistics Trust (MLT), and CapitaLand Ascendas REIT.
When the mega port is finally completed in 2027, JLL believes the West Planning Region will shine brighter as a hotspot for real estate investors to enjoy rent upside and reap capital appreciation.
"Whilst the need to comply with JTC’s regulatory requirements and the short land tenure will likely remain key barriers to entry, the increased availability of quality stock arising from the flurry of development activities should further boost deal flow," JLL said.