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Cold store warehouse rents in Singapore currently stands at between $2.50 and $3.50 per sq ft per month, and is expected to increase as Singapore positions itself as “a hub for the storage, distribution and shipment of vaccines”.
Rents for cold store logistics warehouses are expected to increase as Singapore positions itself as “a hub for the storage, distribution and shipment of vaccines”, revealed a Cushman and Wakefield report.
It noted that cold storage warehouse rents are way higher compared to that of conventional dry warehouses, with the rental premium ranging from 50% to 100% or even higher, depending on the cold storage facility’s type (chilled or freezer).
Currently, cold store warehouse rents in Singapore stands at between $2.50 and $3.50 per sq ft per month.
“The development of a COVID-19 vaccine will increase the demand for temperature-controlled logistics as vaccines need to be kept at low temperatures. There is an increasing expectation by scientists that the COVID-19 vaccine will not be a single shot, but will require annual shots like the flu vaccine to maintain its effectiveness. This will result in a sustained demand for cold storage logistics across the globe,” said the report.
Although the development of cold storage warehouses is more costly than conventional warehouses, the rental premium poses a strong incentive for developers to venture into cold storage projects, where feasible, said Christine Li, Head of Research for Singapore and Southeast Asia at Cushman and Wakefield.
Tenants of these facilities also tend to have longer leases given the scarcity of cold storage warehouses as well as the need to retrofit them to specific requirements.
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In fact, typical lease terms for such facilities range from 10 to 20 years, way longer than the three-year lease for conventional dry warehouses. Moreover, the leases often come with periodic rent escalations that may be linked to inflation.
Meanwhile, the probability of tenants renewing their lease agreements is also “higher than for conventional logistics facilities as the tenants have difficulty finding other suitable facilities in the same location”.
Leases of cold storage facilities are also usually triple net leases as tenants pay for the property taxes, building insurance and maintenance fees.
“We expect a flurry of leasing and investor activity in the cold store logistics market as Singapore enhances the infrastructure required for the safe handling of vaccine storage and distribution in the months ahead. This is a sector we will be monitoring very closely,” said Brenda Ong, Executive Director, Head of Logistics and Industrial at Cushman and Wakefield.
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