E-commerce Sales to Drive Growing Demand for Prime Logistics Spaces in Singapore, CBRE Anticipates

Online shopping festivals and grocery purchases among contributors to growth in e-commerce. Last-mile delivery facilities pivotal to logistics supply chain efficiency as sales increase and together with consumer expectations.

November 22, 2023

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Melvin Lin

Head of Marketing & Communications, Singapore

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By Tricia Song (宋明蔚), Head of Research, Southeast Asia, CBRE

Singapore, 22 November 2023 – Steadily-expanding e-commerce sales in Singapore are likely to drive growing demand for Prime Logistics facilities in Singapore, CBRE has projected in its report, The Evolution of E-commerce and Its Impact on Singapore Logistics Real Estate.

In 2022, the size of the Singapore retail e-commerce market totalled S$5.8 billion, and is projected to grow at 9.9% y-o-y on average, reaching S$9.2 billion by 2027. With retailers increasingly adopting omnichannel strategies, along with outsourcing of deliveries to Third-Party Logistics (3PL) providers, these are positive tailwinds for warehouse demand.

According to the report, limited warehouse supply over the coming couple of years may see demand outpace supply. With occupancy rates already at 91.3% in Q3 2023, e-commerce growth is likely to sustain demand for quality warehouse spaces which will keep occupancy rates resilient. CBRE expects that new warehouse supply will average 2.3 million square feet per year – the equivalent of about 2% of existing stock. This is 34% below the 6-year historical supply.

The report reveals that high online penetration rates and disposable income are among the factors fueling growth in e-commerce in the wealthy city-state. Fashion & apparel and consumer electronics are among the retail categories that are expected to propel e-commerce growth. More consumers are also adopting online grocery shopping, prompting retailers to upgrade and upscale their logistics operations. For example, in Q2 2023, the FairPrice Group obtained the TOP for its S$330-million seven-storey Fresh Food Distribution Centre at Sunview Road. Spanning over 750,000 square feet, the site is more than three times the size of its current temperature-controlled warehouse at Upper Thomson Road.

CBRE Head of Research, Singapore and Southeast Asia, Tricia Song, observed, “In Southeast Asia, we have found that Singaporeans are most likely to time their purchases to coincide with Shopping Festivals, for example 9.9, 11.11, Black Friday, and Cyber Monday. These days therefore represent sharp spikes in order volumes, requiring logistics providers to cater sufficient warehouse capacity, among other resources, in order to cope.”

Figure 5: Share of respondents that will wait more than a week to purchase an item during a shopping festival
Figure 5
Source: Google-commissioned Ipsos e-Conomy SEA Research 2022, CBRE Research

Graeme Bolin, CBRE Head of Occupier and Leasing, Industrial and Logistics Services, Singapore, noted, “With the growth of e-commerce, the landscape has also become increasingly competitive. Platforms and retailers continually try to outdo one another to offer quicker and more convenient delivery options. Consumer expectations have risen together with parcel volumes as a result. Effective last-mile delivery solutions can make or break these retailers.”

Respondents to CBRE’s 2023 Asia Pacific Logistics Occupier Survey indicated that proximity to markets and customers, as well as to public transportation, were the most important criteria for real estate occupiers. In addition, the report reveals that last mile delivery is the most expensive part of the e-commerce supply chain, as poorly optimised delivery routes lead to additional costs for 3PLs and logistics service providers.

Figure 12: Most desirable factors in deciding location of logistics facilities
Figure 12
Note: multiple selection allowed (top three factors)
Source: 2023 Asia Pacific Logistics Occupier Survey, CBRE Research

Graeme commented, “Paying more for conveniently-located facilities therefore is likely to result in larger savings in transportation – representing a more environmentally- and budget-friendly option for logistics providers. It is therefore hardly surprising that the upcoming project, LOGOS EHUB at 4 Pandan Crescent, was fully-taken in Phase 1 of its launch, for example.”

“This example of an ideally-located prime logistics facility for occupiers is well-connected to the AYE, PIE, and West Coast Highway, is minutes away from the Tuas Mega Port and the Malaysia border crossing, and also close to established residential areas like Clementi and Jurong. With its other desirable attributes like generous ceiling heights, accessibility by vehicles of various sizes, and sustainability credentials, I would not be surprised if the remaining spaces are quickly snapped up too when remaining spaces are released in Phase 2 in Q2 2024, especially in this environment of limited supply”, Graeme added.

The report also observed that as at Q3 2023, prime logistics rents have grown 11.7% year-to-date, propelled by strong leasing demand amid limited supply of prime logistics space. With no new completions in Q2 and Q3 2023, options were limited, and large occupiers like 3PLs were keen to hold onto existing spaces due to competition for prime logistics assets.

For the full year, CBRE projects that rents could grow 14%, exceeding the rental growth of 10.2% in 2022.
Tricia expects some moderation in 2024 though, as she concludes, “With prevailing economic headwinds and new prime logistics projects due for completion next year, CBRE Research expects rental growth to likely be tempered in 2024 as occupiers adopt a more stringent approach to expansion as they focus on operational efficiency to contain elevated costs. We therefore estimate rental growth in 2024 to be in the region of 4%.”

To read the full report, click here.

About CBRE Group, Inc.
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