Navigating Challenges And Leveraging Insights Dynamic Cold Chain Industry

AdvertisementSingapore’s cold chain real estate sector presents a promising investment opportunity for the future. With an expected increase in demand for high-specification cold-storage facilities, investors can look forward to long-term returns in this niche market. However, strict development regulations and limited land availability in Singapore mean that the supply of new cold-storage facilities may be scarce.The demand for multi-temperature-controlled facilities is expected to grow, as they serve a range of industries such as F&B, pharmaceuticals, and third-party logistics. For instance, Singapore’s food import and export market heavily relies on cold-storage facilities, with agricultural products making up the majority of items stored there.E-commerce and online supermarket sales have also contributed to the growth of the cold-chain perishables market. This trend is expected to continue, as the demand for perishable food is projected to increase in the years to come.The biopharmaceutical industry in Singapore is also a major contributor to the demand for cold-chain facilities. As more firms invest in Singapore, there will be a sustained demand for high-specification cold-storage facilities to cater to their needs.Despite the growing demand for cold-storage space, Singapore’s capacity is limited due to factors such as a low supply of facilities, lengthy construction periods, and complex operational requirements. This creates a challenge in increasing the supply of this specialized asset class, especially as high-interest rates further exacerbate the issue.Currently, Singapore has a small number of existing cold-storage facilities, with only 36% being multi-user facilities. Most of these facilities are in the western and northern regions of Singapore, due to their proximity to seaports and key infrastructure developments such as Tuas Second Link.However, developing new cold-chain facilities in Singapore is costly and time-consuming. Construction can take up to 2.5 years, which is longer than the usual 2-year time frame for conventional warehouses. Additionally, there is a growing emphasis on sustainability, which could further delay future cold-storage projects, leading to a tighter supply pipeline.Additionally, the development of new cold-chain facilities is subject to complex operational requirements, making it challenging to find suitable industrial sites for development. For instance, facilities that require food processing and manufacturing can only be built within designated industrial estates, and new facilities must comply with food-safety regulations.Despite these challenges, cold-storage facilities in Singapore command higher rents compared to conventional warehouses. In 2023, cold-chain warehouse rents increased by 13%, while overall industrial rents grew by 8.9%. This trend is expected to continue, with an annual rent increase of 2% to 4% over the next six years, including this year. With limited supply and high demand, cold-chain facilities are becoming an increasingly attractive asset class for investors, offering steady long-term cash flows.Brenda Ong, executive director of logistics & industrial at Cushman & Wakefield Singapore, believes that the cold-chain market is an understated asset class to watch, offering investors an opportunity to capitalize on the limited supply and high demand for these specialized facilities. With the potential for steady long-term returns, cold-chain real estate in Singapore is a market worth considering for any long-term investment strategy.

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