1 May 2020


Singapore’s economy looks headed for the worst-ever contraction and first full-year recession in about two decades amid mounting border controls and lockdowns around the world from the coronavirus pandemic.

The grim outlook comes as the Ministry of Trade and Industry (MTI) on Thursday (March 26) slashed its 2020 growth forecast to a range of -4.0 to -1.0 %, from an earlier estimate of -0.5 % to 1.5 %. The last time Singapore registered a full-year contraction of its economy was in 2001 during the Dot.com Bust when growth fell by 1 %.

MTI also said its advance estimates showed the economy contracted by 2.2% year on year in the first quarter of 2020, worse than economists had expected.

Figure 1: Singapore GDP Growth (% year-on-year)

For the first quarter, the construction sector led the decline with a contraction of 4.3 % year on year, followed by the services (-3.1 %) and manufacturing (-0.5 %).

“With the services sector accounting for about the two-thirds of GDP and employment, the main drag is still services,” said DBS senior economist Irvin Seah.

Singapore manufacturing output rose 3.5% year on year in January, compared to a 3.7% drop in the December, according to figures released by the Economic Development Board (EDB) on Feb 26. The biomedical sector’s 41.1 % year on year growth in January was lifted by pharmaceuticals output that surged 59.4%.

Manufacturing shrank in February at the fastest pace in more than five years, reflecting the disruption caused by the coronavirus outbreak.

On a year-on-year basis, Singapore’s manufacturing output decreased 1.1% in February 2020. Excluding biomedical manufacturing, output fell 2.5%.

On a seasonally adjusted month-on-month basis, manufacturing output decreased 22.3% in February 2020. Excluding biomedical manufacturing, output fell 17.9%.

Figure 2: Singapore Manufacturing Output Growth (% year-on-year)

Industrial Property Price Trend

Prices and rentals of industrial space remained relatively stable for most market segments. In Q4 2019, price index of overall industrial property fell marginally by 0.2% while rental index remained constant as compared to the previous quarter. Compared to a year ago, the price index fell by 0.3% while the rental index rose by 0.1%. An overview of price and rental movements is shown below.

Figure 3: Industrial Property Price & Rental Indices

Industrial Property Rental Trend

According to Colliers research leasing demand is expected to remain soft in 2020 on weaker trade, before outpacing supply in 2021, supported by a gradual recovery in the global electronics cycle.

From JTC’s data, it is expected that total net new supply will intensify in 2020 to 23.7 million sq feet, with factories accounting for 78% of that, before tapering off from 2021 onwards.

Warehouse rents will remain soft before stabilizing in 2020-2021 before edging up from 2022 as supply diminishes. Business park and high-specs rents could improve slightly.

We expect the overall, island-wide vacancy rate to edge up in 2020 as net demand lags net supply. Vacancy should decrease from 2021 onwards as demand improves.

Supply, Demand & Occupancy Rates

Occupancy rate of industrial space has declined slightly by 0.1% since Q3 2019 for all industrial space. However within industrial space demand for multi-user factories increased while demand for single-user factories and warehouses experienced a marginal decline.

From Q1 2020 to 2023, some 52.6 million sq ft of new industrial gross floor area (GFA) is projected to come on stream, approximately 13.2 million sq ft of GFA on an annualised basis.

New supply across all industrial types is set to further intensify in 2020 to 2.2 million sq metres led by multiple-user factories at 39%, before tapering off from 2021 onwards.

Figure 5: Future supply of Industrial Space by Type (GFA, 000 sqm)


Singapore is a regional wealth hub and safe haven which will increasingly attract more capital in the long run especially in light of how it has handled COVID-19. If COVID-19 is contained in H1, most sectors should recover by end-2020.

In general, we forecast continued two-tier performance between older lower-specifications and newer higher-specifications facilities. Location and supporting infrastructure could also be differentiating factors for specialized industries such as food factories and data centres.

It is recommend that landlords upgrade their assets to align with Industry 4.0 needs such as automation, artificial intelligence and the Internet of Things to improve productivity and space efficiency.

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