Soft consumption leads to subdued logistics demand

• Leasing demand was relatively quiet in Q3 2024, and overall sentiment remained subdued. The slow recovery in consumption led tenants to make cautious leasing decisions, with some opting to downsize or surrender their spaces.
• Overall vacancy recorded 25.5%, reflecting subdued demand and the introduction of new supply. Submarkets experiencing a substantial supply influx bore the brunt of the pressure. For example, Fengxian’s vacancy rate climbed to over 30% with the delivery of a new project.

Supply pressure continues in Shanghai’s logistics market

• The persistence of supply waves continued, with over 1.1 million sqm of new space delivered during the first three quarters of 2024. In Q3 2024, a project with a total GFA of 118,900 sqm was completed in the Fengxian submarket.
• While west Shanghai submarkets, such as Jinshan and Qingpu, remained primary focal points for supply pressure, the supply wave has extended to encompass other submarkets. For instance, Fengxian submarket anticipates the completion of another project by end-2024.

Rents decrease further due to elevated vacancy levels

• Overall rents declined by 2.2% q-o-q on a like-for-like basis, to RMB 1.48 per sqm, per day. With higher vacancies, landlords of new projects are adopting aggressive rent strategies, while those of existing projects are becoming more flexible in lease negotiations.
• The investment market was quiet in Shanghai in Q3 2024. Investors are selective about assets and cautious about any investment decisions, given the recent supply waves, subdued demand and slow consumption recovery.

Outlook: Short-term pressure expected to cause further rent decline

• The Shanghai logistics market is expected to see another record year of supply. Moving forward, not only will west Shanghai submarkets be under supply pressure, but submarkets like Lingang, Fengxian and Jiading will also see new completions in the short term.
• Competition among landlords will intensify over the short term in the Shanghai logistics market, given that another year of record supply is expected. Rents are anticipated to keep a downward trend over the short term.