APPD Market Report Article
BeijingMay 31, 2022
Higher value-added demand dominates market leasing activities
- Short-term leasing activities decreased temporarily due to the Lunar New Year, a fall in demand for productive and online sales and a decline in demand from enterprises replenishing inventories. Meanwhile, long-term leasing activities remained active, mainly supported by logistics players coupled with cold-chain demand from e-commerce companies.
- Landlords reported well-branded tenants likely to add value to projects dominated market transactions. For example, the upgrading of warehouse units into cold-chain facilities funded by the tenants themselves.
New projects postponed and vacancy rate remains low at 4.3%
- No new supply entered the market in the quarter, primarily due to tight policy restrictions across Beijing. Individual projects adjusted their market positioning to align with policy guides after construction completion.
- The vacancy rate has remained low, recording 4.3% in the quarter, a decrease of 0.3 ppts from the previous quarter, and, coupled with the postponement of new projects, large-area tenants are finding it difficult to source available space.
Gradual rent growth continues, supported by low vacancy
- Overall, market rents remained stable at 0.7% q-o-q growth in 1Q22, and annual growth of 3.4% y-o-y. The postponement of new supply has helped keep moderate pressure on for gradual but slight rent increases.
- The majority of projects continued to show stable rent growth, and nearly all fully occupied projects contributed to the conditions for rental increase across the market.
Outlook: Growth in market demand improving market steadiness
- Some projects affected by the strict acceptance and tax contribution standards of the Beijing government may continue to be postponed. A potential supply peak this year is unlikely to put significant pressure on the vacancy rate, which is expected to rise slightly to 6% with the support of strong demand from logistics and e-commerce industries.
- With more cold-chain storage construction and the further refinement of subsidy policies in the future, the city’s cold-chain facilities are being encouraged to upgrade.