STRATEGIC INDUSTRIAL REAL ESTATE IN THE NEW ECONOMY : BIOPOLIS, THE SINGAPORE EXPERIENCE

Abstract

The structure and behaviour of strategic industrial real estate do not exist in a vacuum. Instead, its fundamental investment values and yields are uniquely moulded by the dynamic interaction among exogenous and endogenous forces revolving around industrial real estate demand-supply conditions; macroeconomic institutional polices and industrial urban plans. By combining a qualitative case study on the Biopolis, a strategic industrial business park in One North Singapore; as well as quantitative empirical research methods such as an industrial real estate market analysis (REMA), an econometric analysis and an investment appraisal; this study sets forth to model the fundamental structure and behaviour of strategic industrial real estate with regards to its demand-supply, capital values, rental yields and total returns. All these are set in the context of exogenous industrial real estate demand-supply conditions; institutional macroeconomic policies and industrial urban plans. The REMA provided a qualitative ex-post analytical framework to understand the market's broad structure; and subsequently, the contingent econometric analysis revealed the critical factors driving the fundamental demand-supply conditions for industrial real estate. Intuitively, this links the broad impacts of the macroeconomic planning policies and industrial urban plans on affecting the structural demand-supply conditions on industrial real estate. Their impacts were also empirically revealed in the investment appraisal methods such as the discounted cash-flow technique, scenario and sensitivity analysis which explicated their effects on the fundamental risk-return characteristics on the Biopolis, critically informing risk-management and value enhancement strategies.