• Quarterly net absorption saw a slight improvement this quarter on a q-o-q basis. Notably, Tokyo saw an increase in demand from 3PLs and e-commerce retailers for facilities in prime locations.

• While vacancy fell slightly to 11.5%, the high vacancy environment persists across the region.

• Varied investment activity was noted across the markets. Investment activity picked up in Seoul, and demand was strong in Tokyo, Sydney and Singapore. Meanwhile, no major transactions were noted in Greater China.

Regional quarterly net absorption saw a slight improvement this quarter, increasing 3.4% q-o-q following three consecutive quarters of decline. Notably, Tokyo saw strong leasing demand from 3PLs and e-commerce retailers for facilities in prime locations. On the flipside, occupier sentiment remained weak in Greater China, with limited activity driven by cost-saving relocations.

New supply fell in Q3 to 3.2 million sqm, on the back of declining completions in markets like Tokyo and Seoul which previously saw an oversupply. Meanwhile, vacancy saw a slight decline of 0.3 percentage points q-o-q to 11.5%, but still sits above the historical 10-year average of 9.9% from 2015 to 2024.

Overall rents continued to slide, with Greater China as the laggard. Melbourne saw a rise in incentives as landlords prioritised filling vacancies. Tokyo remained a bifurcated market, while marginal rental growth was noted in Seoul and Sydney. Rents were flat in Singapore.

Varied investment activity was noted across the markets. Investment activity picked up in Seoul, with more foreign capital observed. Likewise, strong investment demand was observed in Tokyo from both domestic and foreign investors. No major transactions were noted in Greater China as investors remained cautious, while transaction levels tempered in Melbourne. Investors were actively seeking opportunities in Singapore, and overall activity was elevated in Sydney.

Outlook
Moving forward, future supply is slated to moderate, as the market continues to absorb the excess space available. However, demand is expected to remain subdued amid global market uncertainties. Vacancy appears to have peaked outside of Greater China, while investment activity should remain stable although investor caution and higher selectivity is anticipated.