APPD Market Report Article


May 26, 2024

Mi Yang, Head of Research, North China


RMB 1.75


Soft external environment weighs on demand

  • Demand was temporarily stalled by current market conditions in 1Q24. Due to the Chinese New Year holiday, coupled with the negative impact of cautious market sentiment and low-price competition from Langfang and Tianjin, the transaction volume saw a notable decline compared to 4Q23, recording a 75% q-o-q change.
  • The main demand driver in 1Q24 was relocation demand for cost-control purposes. Emerging areas, such as the BDIA district, were relatively active, recording one deal for 9,000 sqm. However, leasing performance was weak in the Daxing and BALP submarkets. New transactions in both submarkets were relatively limited in 1Q24, and a FMCG company surrendered its lease of about 20,000 sqm in Daxing.

Vacancy rate sees a mild increase

  • No new supply entered the market in the quarter as some scheduled projects postponed their completion dates to the next quarter. Unabsorbed space from previously completed projects continued to weigh on areas such as Daxing and Shunyi.
  • The overall vacancy rate rose 0.1 ppts to 10.5% in 1Q24. Slower leasing activities and some surrenders of leases have led to a slight increase in vacant areas. Net absorption recorded negative figures in 1Q24 for the first time in three years.

Landlords provide more flexible rental strategies

  • Overall rents decreased slightly by 0.9% q-o-q in 1Q24. As the market trend for reducing leasing costs continued to expand, some landlords became more flexible and provided rent concessions or longer rent-free periods to attract tenants.
  • The Daxing submarket recorded the highest downward rent adjustment amongst all the submarkets in 1Q24. Due to the competition from BDIA, landlords of ageing warehouses and projects with high vacancies in the Daxing submarket further lowered rents to attract and retain tenants in 1Q24.

Outlook: Rent declines expected to widen as market pressures mount

  • Since the completion dates of some future projects have been postponed to 2Q24, six new projects with a total GFA of about 370,000 sqm are set to enter the market in the next quarter. As tenants are being more selective and taking longer to finalise decisions, landlords are expected to suffer from greater supply pressure in 2024.
  • Rent adjustments are expected to continue through 2024. Overall rents will likely drop further in the next several quarters due to supply pressure and the increasing rent sensitivity of tenants amidst a slow recovery of the economy. However, we expect the lower-rent environment at the start of the year to encourage tenants to upgrade and further boost leasing activities in 2024.

Note: Beijing Logistics & Industrial refers to Beijing's prime non-bonded logistics market.

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