Tuas Mega Port - driving warehouse demand in West Singapore

Western Singapore, especially the Tuas industrial area, is garnering increasing attention from market players, eyeing its growth potential as the home to the upcoming SGD 20 billion Tuas Mega Port, the first phase of which officially opened in September 2022.

A development hotbed

Since the go-ahead for the Tuas Mega Port was given in October 2012, industrial landlords/owners, third-party logistics players, and end users have developed, upgraded and/or refreshed their industrial properties in the West.

This contributed to a 39% jump in the total industrial stock (excluding business parks) in the West Planning Region from 187.9 million sq ft as of 4Q12 to 261.3 million sq ft by 2Q23. In particular, the growth potential of Singapore’s logistics industry, arising from the mega port, cast the spotlight on the logistics/warehouse property segment, resulting in a 74% surge in the logistics/warehouse stock from 47.0 million sq ft as of 4Q12 to 81.8 million sq ft as of 2Q23.

Figure 1: Completed industrial stock* in Singapore’s West Planning Region – By planning area

*Excludes business park
Source: JTC, JLL Research

Navigating towards 2027

We expect the spotlight to continue shining on the logistics/warehouse property segment in the lead-up to 2027. By then, all operations at the city terminals at Tanjong Pagar, Keppel and Brani will have relocated to the mega port. Also, the first phase of the mega port, with a handling capacity of 20 million TEUs (twenty-foot equivalent units), will be fully operational.

Alongside the implementation of the government strategies under the two Industry Transformation Maps for Logistics and Sea Transport – introduced in 2016 and 2018 respectively and refreshed in 2022 – new logistics/warehouse space requirements could emerge as business operating models change and new business ideas are mooted.

At the same time, we expect the drive towards digitalisation and innovation, including the adoption of advanced technologies and supply chain processes, to underpin demand for higher specification (e.g., higher floor-loading capacity, higher electrical loading, and fibre optic infrastructure) logistics/warehouse premises.

However, the West Planning Region has a limited near-term supply pipeline. Based on our research, we estimate annual supply for 2023 to 2026 to average 2.1 million sq ft, falling short of the 10-year annual average net absorption of 2.9 million sq ft from 2013 to 2022.

The limited logistics/warehouse supply pipeline might drive more industrial property owners to explore upgrading or redevelopment opportunities for their ageing assets. They may join the likes of Boustead Projects, Mapletree Logistics Trust and CapitaLand Ascendas REIT, which are redeveloping their properties at 36 Tuas Road, 51 Benoi Road and 5 Toh Guan Road East, respectively, into new multi-tenanted ramp-up facilities by 2025.

The completion of better-quality ramp-up logistics/warehouse developments, coupled with the positive medium- to longer-term demand prospects should continue to underpin rent growth, and keep logistics/warehouse assets in the West on the radar of prospective investors.

Figure 2: Tuas Mega Port – Target Milestones

* Includes the two berths which opened in 2021 to help increase Singapore’s storage capacity during the supply chain crisis
** Maritime and Port Authority of Singapore (MPA), 1 Sep 2022
Source: MPA, Ministry of Transport, JLL Research