Rent discounts trigger a leasing transaction volume bounce

• Several projects signed new leases for more than 5,000 sqm in Q1 2025 through significant price reductions. Prices significantly below the average market rents stimulated the relocation of tenants from low-standard projects to Grade A projects.
• However, as tenants remained highly sensitive to rent discounts, the Beijing logistics market continued to lose large-area tenants to lower-priced Tianjin and Langfang. The resulting surrendering and downsizing continued to weigh on demand.

Vacancy rate continues to rise to 25.2%

• Two new projects in the Pinggu submarket, with a total GFA of 355,800 sqm, entered the market in Q1 2025. Both projects recorded few pre-leasing deals due to their relatively remote location, resulting in vacancy rates above 80%.
• The overall vacancy rate increased by 7.0 ppts to 25.2%. The rise was mainly due to the poor leasing performance of new projects, while vacant space at existing projects continued to be absorbed at a slow pace.

Rents continue to decline at a faster pace

• Overall rent declines continued to widen in Q1 2025, down 2.8% q-o-q and 7.3% y-o-y. A soft leasing market with significant new supply heightened market competition, prompting some landlords to offer substantial rent discounts to facilitate transactions.
• The investment market remained quiet in the quarter. Amidst relatively poor leasing performance and significant new supply, investors became more cautious in their investment decisions related to logistics projects.

Outlook: New supply pressure in 2025 will be less than previously expected

• Individual landlords in the Pinggu submarket actively adjusted their supply strategy in Q1 2025 based on the soft leasing market, dividing the entire project into multiple supply phases and delaying the entry of some of these phases to 2026.
• In an increasingly competitive market, more landlords will realise that direct, significant rent reductions are the only effective way to trigger deals. Rents are expected to decline by a significant 8.5% in 2025, the lowest level in a decade.