The domestic market continues to be the main driver of logistics demand

• The RBW market entered the new year with signs of recovery in import-export activities, though the improvement remained modest. There were a number of new transactions, occurring primarily among tenants that cater to domestic consumption.
• Some tenants, especially those focused on exporting to the international market, have reduced their warehouse capacities, reflecting the ongoing market challenges. In H1 2024, modest net absorption was reported at nearly 21,000 sqm.

The market welcomes new supply in Dong Nai and Long An

• In H1 2024, the Southern Modern RBW market experienced new supply additions in Dong Nai and Long An, introduced by Cainiao and SLP, respectively. These developments have contributed approximately 118,000 sqm of leasable space to the market stock.
• Amid subdued demand, some projects have converted space functionality. Notably, a large-scale project in Binh Duong altered over 60% of RBW space into a factory in Q2. Overall, the RBW market size in H1 2024 remained stable at around 1.9 million sqm.

Average asking rent experiences a modest increase; market yield remains stable

• The average asking rent inched up to USD 4.9 per sqm, per month. This growth was primarily supported by well-performing new projects with higher headline rents, while projects in remote areas kept asking rents unchanged due to sluggish operations.
• The overall market yield has temporarily moved sideways in the face of the current gloomy macroeconomic conditions. Capital values, estimated based on gross asking rents, continued to experience a slight increase.

Outlook: Asset function conversion and hybrid development become prevalent

• The shift in development plans towards RBF in response to the abundant supply and gloomy RBW demand has notably decreased projected stock. It is expected that only about 100,000 sqm of new supply will be completed in the latter half of 2024.
• Besides converting asset functionality, another noteworthy trend is hybrid development, which offers multi-functional spaces for both warehouse and factory uses, aiming to attract a diverse range of tenants and accelerate occupancy.