APPD Market Report Article

Beijing

August 26, 2022

Mi Yang, Head of Research, North China

3.3%

RMB 1.74

Growth
Slowing

Demand from e-commerce and biomedical sectors continues to grow

  • The distribution of daily necessities during the COVID-19 wave in Beijing has contributed to the continuing steady demand for new supermarkets in the logistics industry. This has also led to an expansion in online retail and biomedical sectors, which continue to grow.
  • Hence the demand for cold storage has increased, and the scale of cold storage retrofits in the market has expanded. Due to the lack of available stock, the existing demand has also begun to integrate warehouse units through lease expansions. In addition, leasing activity is further stabilised due to large-tenant domination.

Scarcity of new supply affects vacancy rate, which drops to 4.1%

  • No new supply entered the market in the quarter. In order to fulfil the tax contribution standards of the regional government and the guidelines of the promoted industry, the market positioning of future warehouses has been adjusted to “quasi-industrial park” projects.
  • The vacancy rate remained tight, recording 4.1% in the quarter, a decrease of 0.2 ppts from the previous quarter. Most completed future projects have been largely pre-leased before officially entering the market.

Enterprises with low price sensitivity boost rent increases

  • Overall, the market’s average rent has grown positively by 1.3% q-o-q, recording RMB 1.74 per sqm per day. Large-scale cold storage retrofits for mature, developed projects in high-quality regions had increased the scarcity of ambient (natural temperature) warehouses, leading to rent increases.
  • The tenant demographic in major submarkets close to urban areas, such as Tongzhou, Daxing and Shunyi, has been upgraded and gradually replaced by more stable companies with more leasing power, thus increasing the rental rate.

Outlook: Improving fundamentals to translate to high-end demand

  • In 2022, total stock is expected to increase by 290,900 sqm, and the projects that have started the pre-leasing phase are all anticipating solid leasing performance. In the medium-to-long term, there will likely be greater demand for projects with customised warehousing as net absorption increases. The vacancy rate is forecast to not exceed 6% before end-2022.
  • Due to anomalies across the country created by the pandemic, the demand for daily necessities has secured the increase in demand for emergency logistics, for both ambient warehouses and cold storage.

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

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