• Buying Industrial Real Estate in Singapore: The Complete Guide

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    Singapore is the fourth-largest exporter of high-tech products globally and hundreds of companies in the petrochemical industry have offices here.

    There are also many logistics and aviation companies as it serves as a logistics hub to the rest of the world. Investing in Singapore industrial real estate can indeed be lucrative as the market is predicted to see healthy growth in the coming years.

    First, you have to learn about ownership regulations, interesting areas to buy industrial real estate, taxes, and more.

    Topics covered:

    • Can foreigners buy industrial real estate in Singapore?
    • Singapore’s Industrial Property Market
    • Industrial Areas in Singapore
    • Singapore Industrial Parks
    • How can I find industrial buildings for sale?
    • Taxes

    Can foreigners buy industrial real estate in Singapore?

    Foreigners have no general issues to invest in industrial real estate in Singapore and the restrictions are lower compared to some residential properties, like villas with land plots.

    This is written in the Residential Act, explaining that foreigners can buy the following real estate types without the need of seeking approval from the Singapore Land Authority (SLA):

    • Shophouses (for commercial use)
    • Industrial and commercial properties
    • Hotels (registered under the provisions of the Hotels Act)

    As industrial properties can fetch tens or hundreds of millions of US dollars, I also want to mention that we primarily focus on how it works when investing with the help of a company.

    There are some notable benefits of buying industrial property with companies. Some examples are:

    • Lower corporate tax rates
    • More tax relief
    • Lower interest rates
    • More flexibility at the transfer of the unit
    • Tax exemptions and rebates
    • Others

    Singapore’s Industrial Property Market

    Singapore’s industrial real estate market has remained surprisingly resilient, which is primarily the result of a growing eCommerce market and a tightened supply of industrial space.

    During the COVID-19 pandemic, construction was put on hold that resulted in increased occupancy rates.

    According to Cushman & Wakefield Singapore, the introduction of 5G and increased remote working has further increased the demand for electronics and semiconductors. The biomedical industry also grows at a steady pace.

    In 2020 alone, the biomedical and electronics industries increased by 23.7% and 11.9% respectively, which is indeed not bad during a recession.

    At the end of 2020, the average occupancy rate was the highest since 2016, standing at 89.9%. According to JTC, we saw 50 million square meters of available stock with the following property types accounting for the biggest stocks:

    • Warehouses: 11.1%
    • Business parks: 2.2%
    • Multiple-user factories: 11.4%
    • Single-user factories: 25.4%

    As mentioned, Singapore is the fourth-biggest exporter of high-tech products. ABB and Siemens are just a couple of companies that operate here. You’ll also find many companies in the petrochemical industry here, including Shell and BP.

    Industrial Areas in Singapore

    Singapore is the home of many industrial areas that are located outside of the city center. Below I’ve listed some of the most renowned ones that you should learn more about.

    Jurong

    The area of Jurong has been a part of Singapore’s history ever since its founding in 1819. Located in the North-Western parts, it was the home of many plantations of crops, including pepper, pineapple, and nutmeg prior to the 1960s.

    Gambier and rubber were also produced in great numbers.

    Nowadays, you’ll find the Changi Business Park and the International Business Park located in Jurong and East Jurong is famous for its large port operator, Jurong Port. It’s the only multipurpose port in the state.

    Jurong is mainly famous for being the home of companies operating in manufacturing, IT, and the high-tech industries. Thanks to its strategic location, you’ll also find many logistics companies here.

    Jurong Island

    Jurong Island is located to the South of Jurong and is a large-sized island with many companies and factories in the petrochemical industry.

    Examples of companies and plants located here include ExxonMobil Chemical Plant, Singapore Refining Company Private Limited, Shell, DuPont, and Chevron.

    It’s claimed to be the heart of Singapore’s chemical and energy industry. At the moment, there are more than 100 leading global petroleum, petrochemicals, and specialty chemicals companies located here.

    Random visitors cannot go to the island, but access is limited to visitors and staff that get security passes upon arrival.

    Pulau Bukom

    Pulau Bukom is a restricted and small-sized island located around 5 km to the south of the main island. The size of the island is only around 1.45 square kilometers and the home to Shell’s operations in Southeast Asia. The company has operated for more than 125 years here.

    Changi

    Changi is located in the Eastern parts of Singapore and home to the famous Changi Airport. Not surprisingly, the area serves as an aviation hub and you can find plenty of logistics companies here.

    Most of the parts within or close to Changi have a high density of logistics facilities. Changi Airport is the home of Jetstar Asia Airways, FedEx Express, Qantas, Scoot, Singapore Airlines, and Singapore Airlines Cargo, for example.

    In addition to logistics companies, you can even find banks here and electronics companies. Changi is also the home of the famous Singapore Expo where exhibitions and conventions are held continuously.

    Tuas

    The same as it goes with Changi, Tuas is a new planning area but located in the Western parts of Singapore. Despite not having as much commercial activity as Jurong Island, the area is said to expand much in the coming decades.

    Here, you’ll primarily find petrochemical and logistics companies. By 2040, the so-called Tuas mega port will be finalized to manage all of PSA International’s current assets and operations. It’s one of the biggest port operators in the world.

    Singapore Industrial Parks

    Singapore has many industrial parks that can be found in the outskirts as well as in the city center. There are six of them in total, including:

    • The Airport Logistics Park
    • The Changi Business Park
    • The International Business Park
    • The Seletar Aerospace Park
    • The Singapore Science Park
    • The Tuas Medical Park

    How can I find industrial real estate for sale?

    You have a handful of options when looking for industrial properties in Singapore. Some corporations simply look for listings online and try to connect with agents of the specific properties listed.

    A problem is that the listings can be limited in number and sometimes not updated. Besides, investors also face the issue that the listings include limited or insufficient information.

    If you’re not connected with local partners who can help you find industrial real estate, I would suggest scouting for a partner that can present a handful of properties to you.

    He or she can also explain the market and buyer’s regulations, which is crucial to avoid pitfalls later.

    This is something we can help with at Asia Property HQ as we work with reputable partners with decades of experience from the Singaporean commercial real estate market.

    Other real estate companies that have been present in Singapore for a long time and that have good knowledge about the market include CBRE, Savills, Knight Frank, and Colliers.

    Industrial Property Taxes

    Singapore’s government has written detailed guides about the tax obligations that investors face when buying commercial real estate in Singapore.

    Even if you’re not subject to obscurely high buyer’s stamp duties when buying industrial real estate, you must understand your tax burden beforehand.

    Below I have listed taxes that the government charges to buyers and sellers. Keep in mind that rates change frequently and you should confirm the rates with your local partner and/or check IRD’s website.

    Buyer’s Stamp Duty (BSD)

    Buyer’s Stamp Duty (BSD) is charged for industrial property transactions. The rate decreases progressively, depending on how long you hold the property, as follows:

    • 1% of the first SGD 180.000
    • 2% of the second SGD 180.000
    • 3% of the remaining value

    Annual Property Tax

    A property tax is levied at 10% of the annual value. The annual value is calculated based on the yearly estimated rental income.

    The Inland Revenue Authority of Singapore (IRA) has written a guide regarding the annual property tax that I recommend you read if you want more information.

    Capital Gains Tax

    Capital gains tax is normally not charged for residential or commercial property.

    However, the government might charge a capital gains tax if they deem that you’re trading real estate. You should also clarify this with your partner before making a purchase.

    Seller’s Stamp Duty (SSD)

    Seller’s Stamp Duty is charged if you sell the property before a certain time limit. The rates and time limits are currently as follows (valid for purchases on or after January 12th, 2013):

    • Up to 1 year: 15%
    • More than 1 year and up to 2 years: 10%
    • More than 2 years and up to 3 years: 5%
    • More than 3 years: No SSD

    How do I determine the value of an industrial property?

    When calculating taxes or the value of a property, you must know the annual value. The values are determined as follows:

    Whole building

    The Annual Value is determined based on the annual gross rent of the complete structure. Corridors, toilets, guardhouses, substations, and mezzanine spaces are all taking into consideration.

    1 single unit in a multiple-user property occupied by a single user

    The Annual Value is determined based on the annual gross rent of the specific unit, including the mezzanine space, roof terrace, toilet, and air-con ledge. It does not include any void spaces though.

    2 or more adjacent units are occupied or to be occupied by a single user

    Same as for 1 single unit. For more information about other scenarios, I recommend you check IRA’s website.

    Can I use CPF to buy industrial properties?

    On contrary to residential properties, you are not allowed to buy industrial properties by using your Central Provident Fund (CPF).

    That’s it for this article. I hope you found it interesting and useful. If you want to learn how it works when buying office space in Singapore, I recommend you to read my separate article. If you have any other questions, feel free to write a message below or send us a message.

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