Navigating Challenges And Leveraging Insights Dynamic Cold Chain Industry
Singapore offers a promising long-term investment opportunity in the cold-chain real estate market, as the demand for high-specification cold-storage facilities is expected to increase in the coming years. However, strict development regulations and limited land availability means that the supply of new facilities will be limited.
The majority of cold-chain facilities in Singapore are built-to-suit and feature multi-temperature control to cater to various industries such as F&B, supermarkets, pharmaceuticals, and third-party logistics. These facilities are crucial for the smooth operation of these industries, especially in Singapore’s food import and export market, which heavily relies on cold-storage facilities for perishable goods.
The rise of e-commerce and online supermarket sales has also contributed to the growth of the cold-chain market. This trend is expected to continue as the demand for perishable food increases, leading to a sustained demand for ambient, air-conditioned, and chiller food storage space.
The demand for pharmaceutical cold-chain facilities has also been increasing due to the growing biomedical industry in Singapore. As more pharmaceutical companies invest in Singapore, there will be a continued demand for high-specification cold-chain facilities to cater to their needs.
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However, the limited capacity of cold-chain facilities in Singapore poses a challenge to meeting the growing demand. The construction of new facilities is costly and time-consuming, and the complexity of operational requirements limits potential development sites.
The majority of existing cold-chain facilities in Singapore are owner-occupied, with only a small percentage available for multi-user occupancy. Most facilities are located in the western and northern regions of Singapore, near key ports and infrastructures.
The construction of new cold-chain facilities takes about 2½ years, which is longer than conventional warehouse development. The development period could increase even further due to the increasing importance of sustainability in the industry.
Moreover, the development of new cold-chain facilities faces complex operational requirements, limiting potential sites for development. This, coupled with the limited supply of facilities, results in higher rental rates for cold-chain facilities compared to conventional warehouses.
Given the limited supply and high demand for new cold-storage projects, the average rental rates for cold-chain facilities are expected to increase in the next six years. This presents a promising investment opportunity for those looking for steady long-term cash flows.
In conclusion, the cold-chain market in Singapore is an understated asset class to watch, with limited future supply and high leasing demand. Investors who capitalize on this opportunity can expect a steady long-term return on investment.