• Quarterly net absorption reached 3 million sqm in Q1 2025, a slowdown from the last two quarters. Overall activity is anticipated to remain subdued, as tariff related headwinds filter through markets over the next few quarters.

• While vacancy fell slightly by 0.1 percentage points q-o-q to 14.7% in Q1 2025, high vacancy is expected to persist in the near term.

• Investment activity across Asia Pacific’s logistics markets showed varied performance in the first quarter. Investor appetite is expected to sustain, albeit at a higher level of selectivity.

Q1 2025 saw a slowdown in net absorption, against a backdrop of challenging market conditions. Over the next few quarters, demand is expected to remain subdued as the uncertainty surrounding tariffs drags on, halting occupiers’ plans to expand or relocate as they reassess their strategies.

New supply continued to moderate in Q1 2025, totaling only 3.4 million sqm – the lowest quarterly reading since Q1 2022. Consequently, vacancy dropped slightly to 14.7%, marking its third consecutive quarter of decline. Nonetheless, compared to the historical 10-year average of 9.8% from 2015 to 2024, overall vacancy is still at high levels.

Rents varied across the region but continued their overall downward trend in the quarter, weighed down by Greater China. Activity in Seoul picked up with strong absorption in various districts, while mixed rental growth was observed across Sydney. Singapore’s market remained quiet, with few new enquiries or deals.

Investment activity was a mixed bag across different markets in Q1 2025. In Greater China, Beijing and Shanghai continued to experience subdued investment activity, largely due to macroeconomic challenges and ongoing geopolitical tensions that are constraining transaction volumes. On the flipside, Hong Kong bucked this trend, recording increased activity driven by disposals by various investment groups. Tokyo’s market demonstrated some resilience, with strong demand from both domestic and overseas investors especially for fully occupied assets. Similar, some large deals were noted in Seoul, with foreign investors showing active interest.

Outlook
Over the next few quarters, occupier demand is expected to slow due to tariff related headwinds. While supply is slated to moderate further, vacancy is expected to remain at elevated levels in the short term. Overall, sustained investment appetite is anticipated, although offshore investment in Greater China is likely to remain subdued. In a climate of economic uncertainty, investors are expected to be more selective when making their investment decisions.