MODELLING OF DEMAND FOR WAREHOUSING SPACE IN SINGAPORE

Abstract

The study of real estate has been the interest of many researchers in the recent years. In Singapore, there has been quite a few work done on the different kinds of real estate properties. Nevertheless, these studies seem to major more on the commercial, residential and industrial properties. Warehousing has been relatively ignored even though this sector is getting more important now as the government aims towards becoming an international distribution hub. As the government is planning on the allocation of our scarce land resources towards the development of modern warehouses, it would be of interest to know what factors have given rise to the demand for warehousing space in Singapore. As such, this particular work has developed an econometric model for this area to find out the determinants as well as to explain the interrelationships between the various variables. From the use of the two-stage least square analysis, a system of three simultaneous equations is developed to explain the complex structure of the market. It is found that demand for warehousing space is mainly determined by the supply of warehousing space, gross domestic product of the economy, export price index and net investment commitment from the manufacturing industry. The first two variables have immediate effect on demand while change in export price index and net investment commitment have a lag effect of one quarter and four quarters respectively. The model provides an estimate of the demand for warehousing space in Singapore given a change in the particular determinants. With this model, it would provide a clearer picture as to how and when demand may be affected by its determinants. As such, short term forecasting of the warehouse space demand would be made possible.