Logistics and Industrial Market Insights

February 22, 2024 / By ,

Supply boosts demand figures

After a record reading in the previous quarter, net absorption slowed moderately on a q-o-q basis, but remains well above the five-year quarterly historical average. Across Tier 1 cities1 , net absorption was around 1.7 million sqm q-o-q (above the five-year historical quarterly average of 1.3 million sqm), driven by another strong reading in Seoul.

Occupier demand across Greater China remained generally steady, despite the increasing macroeconomic headwinds. In Beijing, leasing demand remained stable during 4Q23, with a significant number of new leases surpassing 10,000 sqm. The notable sectors driving this demand were health care and supply chain. Meanwhile, Shanghai experienced an overall improvement in leasing demand, following a relatively slow start to the year. The second half of the year saw a rise in short-term leases that catered to shopping festivals.

In Hong Kong, the leasing market was primarily driven by lease renewals.

The market conditions in Tokyo remain consistent with previous quarters, characterised by robust demand from logistics companies, e-commerce and other retailers. However, there was a lengthier timeframe for new buildings to secure tenants. Strong demand in Seoul is being driven by robust supply, with 2023 net absorption more than double the net absorption in 2022.

Demand in Singapore remained steady. However, there were still a number of outstanding requirements for ambient and cold storage spaces from logistics service providers and end-users. Meanwhile, demand somewhat decreased in Sydney and Melbourne. The economic slowdown, combined with continuous rental growth, led to reduced levels of enquiries and leasing activity during the last quarter of the year.

Asia Pacific rent growth positive, but slows again

Rents broadly trended higher on average in the region, but growth continues to slow. The Tier-12 APAC rent index rose by just 0.5% q-o-q, and 4.6% y-o-y in 4Q23. High vacancy and increasing macro-headwinds, coupled with very strong growth in the past 12- 24 months, mean that a rental growth slowdown was almost inevitable.

Greater China rents faced increased pressure during the fourth quarter of 2023. Beijing, Hong Kong, and Shanghai recorded falling average rental levels. In Tokyo, rising costs have led to higher asking rents; however, some property owners are offering greater incentives, resulting in moderate or stagnant effective rent growth for some assets. Rents in Seoul remained relatively unchanged throughout the quarter.

On the other hand, Singapore saw rents on a continued upward trend, although the pace of growth has slowed compared to previous quarters. Rents in Sydney and Melbourne increased in 4Q23, but at a significantly slower rate compared to the previous 12-18 months.

Investment activity patchy across Asia Pacific

Generally, investors remain broadly cautious. Capital costs are elevated and continue to weigh on activity, while rising macroeconomic headwinds and new geopolitical flashpoints created additional uncertainty for the global economy.

In terms of activity by geography, similar to previous quarters, transactions across Mainland China were minimal. No major deals took place in Beijing or Shanghai. However, we saw a 99% increase in quarterly volumes in Hong Kong, although these volumes can be volatile. On a year-on-year basis, volumes were down by 48%.

Tokyo remains an attractive market for investors, although the level of activity remains relatively low. In Seoul, the Wonchang-dong Logistics Center in Incheon, which entered into a forward purchase contract in 4Q21, finally closed during the quarter.

In Singapore, there was one notable deal recorded in 4Q23, with a warehouse located at 12 Gul Drive selling for SGD 6.5 million in October 2023. The property has a land tenure of 30 years from 16 December 2003.

Despite the challenging investment environment, both Sydney and Melbourne recorded elevated volumes. The industrial sector has demonstrated resilience amidst increasing headwinds.

In terms of yield movements, investment yields were either stable or decompressed across all major markets in 4Q23. Beijing and Hong Kong yields rose q-o-q, but remained flat in Shanghai. Yields were flat q-o-q in Tokyo and Singapore, but rose marginally in Seoul. The decompression trend continued in Sydney and Melbourne, though the cycle is likely nearing its peak.

Patchy outlook suggests pockets of opportunity

The 2024 outlook is weighed down by persistent macroeconomic challenges, though there may be upside with potential rate cuts on the horizon. Despite resilient demand, rental growth will decelerate due to high vacancy rates. However, there are signs of stabilisation as the Asia Pacific supply cycle approaches its peak. The still challenging development financing environment is causing delays in numerous projects. This may help demand to catch up in the coming 12-24 months.

In terms of investments, yield movements are converging across the region, with yields remaining flat or decompressing in major markets at the end of 2023. This differs from 2022 and the first half of 2023, when there was both yield decompression and yield compression across different markets. The current greater synchronisation is expected to continue throughout 2024. As the interest rate cycle approaches maturity, there may be more clarity on financing conditions, potentially boosting transaction volumes in the upcoming year.


1 Beijing, Shanghai, Hong Kong, Tokyo, Singapore, and Seoul (net absorption is not currently tracked in Sydney or Melbourne)

2 Includes Beijing, Shanghai, Hong Kong, Tokyo, Seoul, Singapore, Sydney and Melbourne









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