Leasing demand continues to recover

• Leasing demand in Beijing’s non-bonded Grade A warehouse market continued to recover, with quarterly net absorption reaching approximately 120,000 sqm, representing a significant y-o-y increase.
• Meanwhile, cost-driven relocations dominated leasing activity, as cost-sensitive tenants continued to shift from mature submarkets to emerging areas. The Pinggu submarket led the city in transaction volume, supported by competitive rents and modern facilities.

Vacancy rate sees temporary easing

• No new projects were delivered in Q2. Amid a temporary slowdown in supply and steady absorption of existing stock, the market vacancy rate decreased by 2.6 ppts to 31.6%.
• As vacancy remained at historically high levels, landlords continued to adjust new supply schedules. Project suspensions and delivery delays were recorded during the quarter, easing supply pressure to some extent.

Rents extend downward trend

• Amid persistent destocking pressure, landlords continued to adopt a price-for-volume strategy through rental concessions and flexible lease terms. Market rents declined by 5.9% q-o-q, largely in line with the decrease recorded in Q1.
• By submarket, rental declines were more pronounced in Pinggu, where vacancy pressure remained elevated, and in TLP, which continued to face tenant outflows.

Outlook: Supply pressure remains the key headwind

• Although the recovery in Beijing’s macro consumption market has slowed, growth in smart wearables and high energy-efficiency home appliances is expected to drive expansion of leading e-commerce platforms, supporting leasing demand from 3PLs serving the sector.
• However, around 900,000 sqm of new completions over the next 12 months will weigh on market fundamentals. The influx of supply is set to push vacancy higher, with rents expected to remain under downward pressure in the short term.