Singapore’s economy grew by a spectacular 8.3% in the first quarter of 2011, signifying that the buoyant economic performance was brought into 2011, albeit at an overall moderated pace. With this, the Ministry of Trade and Industry projected a 5.0% to 7.0% GDP growth in 2011, up from a previous forecast of 4.0% to 6.0% growth. Meanwhile the Consensus Economics real GDP to grow by 1.8% in 2Q 2011 and overall a 6.0% growth for 2011.
Singapore’s manufacturing activity continually improved in the second quarter of 2011. The Purchasing Managers’ Index (PMI), which captures exports and new export orders, is a barometer to the health of the manufacturing sector. A reading above 50 shows that manufacturing output is expanding. The PMI for all manufactures improved to 52.5 in April and 50.8 in May 2011.
Rents of industrial space continued on an upswing in the second quarter of 2011, with the lead increase being contributed however by high-tech industrial and business parks. In the second quarter of 2011, high-tech industrial space saw rents increase quarter-on-quarter by 5.5% to an average $2.90 per square foot per month (psf/mo), while business parks saw rents improve by 4.2% quarter-on- quarter to an average $3.70 psf/mo, clearly demonstrating that the threats from ample new supply no longer exist and stronger interest for such space for alternative office use as conventional office rents continually heads north. The rental recovery however placed high-tech industrial space rents to continue to be 30% below the peak in the second quarter of 2008, and business park rents 19% lower than the peak in the second quarter of 2008, as at the second quarter of 2011.
Rents of upper-storey conventional factories increased by 2.9% quarter-on-quarter in the second quarter of 2011, averaging $1.80 psf/mo. Meanwhile, rents of warehouses averaged S$1.83 psf/mo, reflecting a 2.8% quater-on-quater increase. The rental slowdown was largely due to the rapid increase in the previous quarters as manufacturers and warehouse users expanded in their businesses and requirements, leading to a higher occupancy cost where users are increasingly cautious. Nevertheless, the continued rental increase reflected the strength of the warehouse and manufacturing space in the face of sustained economic growth.
“High-tech and business parks are expected to continually receive strong leasing interest in the second half of 2011. The interest for newer, better specified space is expected to be stronger, depending on how attractively they are priced to occupiers.”