In the first half of 2024, rents for logistics properties across much of Asia-Pacific region continued their upward trend but mainland China witnessed a sharp plunge as business activities slackened, a report by Knight Frank reveals.
Rents for logistics spaces in Shanghai fell 15% and 8.6% in Beijing as tenants chose to surrender existing leases and downsize. China’s exports grew at their fastest in fifteen months in June, which supported some demand for logistics spaces, but not enough as the world’s second-biggest economy is struggling for momentum.
“While exports have been a positive spot for the Chinese mainland, they have to be considered against the macroeconomic backdrop,” said Christine Li, Knight Frank’s head of research for Asia-Pacific. “Consumption and investment have been weak, and the broad economic slowdown has weighed on the demand for logistics warehousing space in Shanghai and Beijing” she added.
“Vacancies in both [Shanghai and Beijing] have surged to over 20 per cent, compelling landlords to cut rents and shorten leases to compete for tenants,” the report said.
The real estate consultancy pointed out that this situation is likely to become worse as more warehouses are being built in mainland China and new logistics supply is set to flood the market in coming months.
On the other hand, logistics rents held steady or increased in most of the 17 cities tracked by Knight Frank, with Singapore being the best performer. Rents for logistics properties in the city-state grew by 10.8% in H1 2024 on an annual basis, driven by strong factory activity.
Average rents in the Asia-Pacific region for industrial spaces increased by 2.4 per cent on the year in the period under review, representing a slowdown from the 6.2 per cent growth in 2023.
“It remains clear that logistics occupier markets are on the whole transitioning to a more neutral state from one favouring landlords,” Li said.
China on Wednesday (Aug. 7) reported imports rose by a stronger-than-expected 7.2% in July from a year ago, while exports missed forecasts with 7% growth. The country’s annual inflation rate climbed to 0.5% last month from 0.2% in June, exceeding market forecasts of 0.3% and pointing to the highest figure since February, the National Bureau of Statistics reported Friday (Aug. 9).
The latest CPI report also revealed signs of the ongoing real estate slump. Rental prices fell by 0.3% year-on-year in July, steeper than the 0.1% drop for the year so far, the statistics bureau data showed.
Last month, the People’s Bank of China had lowered the seven-day reverse repo rate, loan prime rates and also the medium-term lending facility rate.
