A year on from the COVID-19 pandemic, countries which have embarked on vaccination programmes are seeing the light at the end of the tunnel with the path to economic reopening now available. Progress on vaccination will boost business sentiment and bodes well for demand for industrial property as growth prospects improve.
Recent developments and trends in the wake of the pandemic should support demand for industrial property in Singapore.
1. Proliferation of e-commerce and digital channels
While many of Singapore’s consumers are tech savvy and have embraced online shopping, e-commerce adoption still lags behind other countries such as the US or the UK. However, the COVID-19 pandemic has altered the shopping behaviour of consumers, with many trying digital channels for the first time or even switching to online platforms permanently.
Forced to stay home during the circuit breaker in 2020, many Singapore residents had to turn to order food and other household essentials online. Work-from-home arrangements and safe distancing measures will continue to encourage the growth of e-commerce.
As a result of the pandemic, local retailers, smaller merchants and even hawkers which did not have a digital presence had to pivot very quickly to open up online channels in order to make up for the loss in revenue from lower footfalls.
Some players may even choose to move out of their retail spaces and concentrate on online selling. Relocating to industrial areas to take advantage of more manageable rental costs could help to prop up demand for industrial property.
The rise of e-commerce will also create a spillover effect for supply chain and logistics services which creates a greater need for warehouse, storage, distribution and last-mile spaces. This will boost demand for industrial real estate.
2. Rise of work-from-home arrangements
For many months, work-from-home (WFH) had been the default working arrangement for many companies as safe distancing measures were implemented to prevent the spread of COVID-19.
While restrictions have eased somewhat and employees could return to the office, many companies have chosen to embrace flexible, hybrid or blended working arrangements. With employees having the choice to work remotely from home or at the office, companies could now be looking to downsize their office spaces.
As a result, companies could be looking to relocate from city downtown locations or prime business areas to alternative city-fringe areas or even to industrial areas or business parks.
3. Digital transformation
COVID-19 has fast-tracked the need for business across all industries to embrace digital transformation.
With Industry 4.0 now underway, more companies will be tapping on artificial intelligence, digitalisation, cloud computing, virtual reality, remote learning technology, robotics, industrial automation and data analytics to supercharge their businesses. This will create a greater demand for data centers.
The robust technology sector will see continued demand for spaces at business parks.
Overall, these trends are supportive of demand for industrial property and investors looking to reallocate capital could possibly consider these areas. At the same time, they should still do their homework to assess whether industrial property is an appropriate fit to their portfolios.
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