Given the nation’s love for food, it comes as no surprise that Singapore has a thriving food manufacturing industry.
According to Enterprise Singapore, the food manufacturing sector contributed S$4.3 billion or 1.1% to the country’s GDP and employed more than 48,000 workers in 2017.
Prospects for the food industry seem bright amid ongoing efforts by the government to help businesses innovate, and adopt new technologies as well as keep abreast of evolving market trends. The aim is to revamp the industry, drive productivity growth, generate new jobs and position Singapore as a leading food and nutrition hub in Asia by 2025.
In addition, global forces such as rapid urbanisation, population growth, changing consumer trends, technology advancement, and rising income will continue to transform the food industry.
“Disruption is par for the course in today’s business environment. It’s felt across many industries, and food manufacturing has not been spared. As businesses strive to cope with the new trends and market shifts, their real estate needs will change accordingly. This is already happening – the push for greater productivity has spurred healthy demand for food factories and central kitchens in Singapore,” said Dominic Peters, Senior Director of Industrial Services, Colliers International.
Colliers’ recent report on Singapore’s industrial property market notes that there is robust growth of food factories in Singapore, particularly in locations near the city centre and more established food manufacturing zones such as MacPherson, Pandan Loop, and Bedok North.
Food fight in food paradise
The rise of e-commerce and increasingly competitive food delivery services sector - a part of a diverse food industry in Singapore - also helped to boost demand for industrial space.
In March 2018, Foodpanda opened its first central kitchen with a dine-in option in Woodlands Industrial Xchange. A month later, Deliveroo rolled out its second central kitchen in CT Hub 2. Their rival GrabFood recently said it is looking at introducing central kitchens in Singapore during a media briefing, although it did not provide further details.
Amid the intense battle in this market segment, grocery delivery startup honestbee announced in May 2019 that it will stop its food delivery service in Singapore as part of a strategic review of its business.
Mr. Peters added, “We expect digital technology and automation to be among the main drivers of change across the food industry. Manufacturers will have to have deep pockets and healthy appetite for innovation. Real estate providers would similarly need to future proof their spaces, which could include offering more flexibility to merge smaller units into larger spaces, providing more integrated shared facilities, and introducing higher specifications to suit manufacturing needs of tomorrow.”
Related content: Robust Growth of Food Factories report
Supply pipeline
Given the ample supply of food factory space in Singapore, food businesses would be spoilt for choice. Data from the JTC showed that over 637,000 sq ft of food factory space came on-stream in Q1 2019 – a surge from about 31,431 sq ft completed in the whole of 2018.
Colliers Research says another 3.68 million sq ft of such spaces are scheduled to be completed in 2019-2020. This supply influx will be located mainly in the North, East and West regions. The largest upcoming project, JTC Bedok Food City with a total Gross Floor Area of more than one million square feet, is expected to be ready in early 2020.
Rental rates and capital values
With robust supply coming on-stream, Colliers Research expects rents and prices of food factories to remain largely stable over the next three to five years.
Rental rates and prices of food factories could vary quite widely depending on location, building design, specifications and remaining land tenure. Due to the time sensitivity for food catering and delivery services, central kitchens located near the CBD area or residential neighbourhoods command higher rents and prices than average.
Colliers recommends that occupiers be mindful of the regulations and keep an open mind to facilities further from the city center in view of rent savings. Operators should continue to upgrade their facilities to remain competitive.
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