APPD Market Report Article

Shanghai

May 26, 2024

Daniel Yao, Head of Research, China

-0.1%

RMB 1.55

Rents
Falling

Demand remains stable over the first quarter

  • Shanghai’s logistics demand held steady over 1Q24 with net absorption reaching 74,000 sqm, down slightly from the same period the year before. The city’s continued supply wave meant vacancy rose despite the quarter’s leasing, with the overall vacancy rate up 1.6 ppts q-o-q to 16.6%.
  • Submarket performance continued to diverge on the back of imbalanced supply, with vacancy in Jinshan and Qingpu remaining elevated. Overall demand was led by 3PLs and manufacturers; for example, a 3PL provider leased approximately 10,000 sqm in the Pudong submarket while manufacturers were active in Fengxian and Baoshan. 

Two projects reach completion

  • Two new projects delivered nearly 290,000 sqm over the quarter, making 1Q24 the third consecutive quarter with over 200,000 sqm of new supply. ESR Qingpu Yurun Logistics Park Phase 2 added 213,800 sqm, while Logos Songjiang Xinbang Industrial Park completed with 76,000 sqm.
  • Submarkets in west Shanghai continued to feel the bulk of the market’s supply pressure. For example, the total stock of the Qingpu submarket has risen 66% compared to 1Q23. Submarkets facing a large amount of supply have seen an impact in terms of occupancy and rent performance. 

Rents decline amid continued supply wave

  • Overall rents declined by 0.7% q-o-q on a like-for-like basis, reaching RMB 1.55 per sqm, per day. Rent declines were more evident in west Shanghai submarkets facing a large amount of supply. Landlords in new projects prioritised filling vacancies and adopted more flexible stances on rents.
  • No investment transactions were concluded in Shanghai in 1Q24. Investors are more selective about assets, given the recent large supply and economic conditions, and they are taking longer to finalise decisions. That said, assets in top-tier markets like Shanghai continue to stand out from those in the rest of the country.

Outlook: 2024 is likely to set a record for supply

  • Shanghai’s supply wave is expected to gather pace over 2024, with annual supply expected to reach 1.4 million sqm. While submarkets like Jinshan, Qingpu and Songjiang are expected to see most of the supply, areas like Fengxian and Lingang will also see new projects.
  • We expect policy stimulus to further support a recovery in consumption, which should translate into greater demand for logistics space. That said, any rebound in demand should be balanced by the market’s continued large supply wave, which will put further pressure on rents. 

Note: Shanghai Logistics & Industrial refers to Shanghai's modern warehouse facilities.

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