STUDY OF THE SUPPLY & DEMAND OF FACTORY SPACE IN SINGAPORE 1985-1994

Abstract

The nature of the property market is complex. This study concentrates on the supply and demand of factory space which is highly "Needs" and "Cost" driven in Singapore. "Needs" can be analysed in terms of derived demand, i.e. changing demand as a result of growth or decline in the manufacturing sector. On a micro level, "Needs" can refer to the users' requirements, i.e. the changing production requirements by factories. On the other hand, "Cost" refers to production and business related costs of operating in Singapore. With lower wages and abundant natural resources, neighbouring countries, namely Indonesia, Vietnam, China and Malaysia are attracting large amounts of foreign investment. Both the public and private developers must constantly strive to upgrade and evaluate their designs and prices in order to keep up with competition from the neighbouring countries. This study attempts to formulate a multiple regression equation from an econometric model to study the demand for factory space. Within the macro level, a few economic barometers namely, employment by the manufacturing sector, property price index of factory space, investment commitments, prime interest rates and gross domestic product are examined in making projection of demand for the next three years, till end of 1997. The forecasting results, through expost forecasting from the end of the first quarter of 1991 to the end of the second quarter of 1994, have validated the reliability of the regression model in providing short term forecasts. The exante forecast indicates that demand is likely to override supply at the end of the first quarter of 1996.