Navigating Challenges And Leveraging Insights Dynamic Cold Chain Industry
New appointment of Cushman & Wakefield boss Duncan White1. Cold-Chain Market in Singapore Offers Attractive Long-Term Investment Opportunity
Singapore’s cold-chain real estate market presents a promising investment opportunity for the long term. The demand for high-specification cold-storage facilities is expected to increase in the coming years. However, strict development regulations and limited land for new facilities in Singapore will result in limited supply.
2. Built-to-Suit Facilities with Multi-Temperature Control
The cold-chain market in Singapore plays a crucial role in supporting various industries such as food and beverage, supermarkets, pharmaceuticals, and third-party logistics. These multi-temperature-controlled facilities are customized to cater to the specific needs of different industries. They offer a range of temperature options to store a wide variety of products.
3. Essential for Singapore’s Food Import and Export Market
One of the key features of Parktown Residences, developed by Capitaland, is its prime location near the Tampines North MRT Station. With plans for the station to become a key hub on the upcoming Cross Island Line (CRL), residents will enjoy convenient access to the city’s core, Jurong Lake District, and Changi Airport. This strategic connectivity will provide effortless commutes to major employment and leisure destinations. In addition, the Downtown Line station and nearby bus interchange will further enhance accessibility within the estate. Parktown Residences, proudly brought to you by Capitaland, truly offers the perfect blend of modern living and excellent connectivity. Don’t miss your chance to experience the best of both worlds at Parktown Residences.
Singapore’s food import and export market heavily relies on cold-storage facilities. With about 60% of locally manufactured food being exported and over 90% of the food supply being imported, the majority of items stored in cold-chain facilities are agricultural products.
4. E-commerce and Online Supermarket Sales Drive Growth
The rise of e-commerce and online supermarket sales has also contributed to the growth of the cold-chain perishables market in Singapore. As the demand for perishable food increases, there will be a sustained need for ambient, air-conditioned, and chiller food-storage space.
5. Growing Demand from Biomedical Industry
Singapore’s burgeoning biomedical industry has also fueled the demand for pharmaceutical cold-chain facilities. As more pharmaceutical companies invest in Singapore, there will be a continued need for high-specification cold-chain facilities to meet their specific requirements.
6. Limited Supply of Existing Facilities
Singapore’s current stock of cold-storage space is relatively small. While there are no official statistics available, it is estimated to be over 5.4 million sq ft (in gross floor area or GFA) based on major properties tracked by Cushman & Wakefield Research. Only 36% of this is multi-user facilities, with the majority being owner-occupied.
7. Most Facilities Located in Western and Northern Regions
The majority of cold-chain facilities in Singapore are located in the western (estimated 70%) and northern regions (20%). The western region is preferred due to its close proximity to major seaports like Jurong Port and Tuas Mega Port, while the northern region appeals to its nearness to the Singapore Causeway and Sembawang Wharves. The remaining 10% is distributed across the central and eastern regions.
8. High Development Costs and Longer Timelines
The construction of new cold-chain facilities in Singapore is a complex process and involves high development costs and longer timelines compared to other logistics assets. On average, it takes about 2½ years to complete a cold-storage warehouse, six months longer than a conventional warehouse.
9. Operational Requirements Complicate Development
Developing new cold-chain facilities in Singapore is not just about construction; there are also complex operational requirements to consider. This makes it challenging to find suitable industrial sites for new developments. For example, facilities that involve food processing can only be built within designated industrial estates and must adhere to prevailing food-safety regulations.
10. Understated Asset Class with Strong Potential
Despite the challenges, cold-storage facilities in Singapore command higher rents compared to conventional warehouse assets. In 2023, cold-chain warehouse rents increased by 13%, while overall industrial rents grew by 8.9%. Given the limited supply of new projects, we can expect to see a yearly increase of 2% to 4% in cold-chain rents over the next six years.
11. Conclusion
The combination of limited future supply and high leasing demand for cold-chain facilities makes it an asset class worth considering for investors. While they may be more operationally intensive, they offer steady long-term cash flows and the potential for strong rental growth.