Demand rebounds after a slowdown in 1H22

• Net absorption improved to 145,000 sqm on the back of resilient leasing demand. While this was counterbalanced somewhat by new supply, vacancy still decreased slightly from 9.9% to 9.8%.
• The drivers of demand varied in the quarter. Local companies, including 3PLs, made over 5,000 sqm in commitments in both a newly-completed building and a stabilised asset in Songjiang. In addition, new energy vehicle (NEV) firms continued seeking space, with a well-known NEV maker leasing a Fengxian asset in full upon completion.

Three projects complete over the quarter

• Three projects reached completion in the quarter, following a relatively quiet 2Q22. Vanke delivered Jinshan Caojing Park (42,000 sqm) with solid pre-leasing, while the developer’s Fengxian Seaport project was fully occupied on completion by an NEV firm. New Ease also delivered Songjiang Xinbang Park (55,000 sqm).
• Two projects in Qingpu and Jinshan are expected to deliver a total of 408,600 sqm over the remainder of the year. ESR Qingpu Yuren alone will contribute 345,000 sqm, increasing Qingpu’s total stock by 30% and potentially leading to higher vacancy in the submarket.

Rents maintain stable growth amid resilient demand

• Rents grew by 0.7% q-o-q and 3.1% y-o-y in the quarter, both on a like-for-like basis. The quarter’s growth trend was underpinned by stable demand, particularly in Shanghai’s more mature submarkets.
• No transactions were closed in Shanghai in 3Q22. Nevertheless, both international and local investors remained interested in logistics assets, especially in key logistics hubs such as the Greater Shanghai area.

Outlook: Supply pressure to elevate vacancy

• With new supply over 2022 expected to reach a similar level to the previous year, vacancy is likely to be elevated over the short term, especially in submarkets such as Qingpu that are expected to see considerable supply.
• Demand is expected to continue recovering from the pandemic-related disruptions of 1H22. 3PLs are expected to continue to lead demand while retailers, manufacturers, and e-commerce firms gradually recover from the economic slowdown. Cold chain demand is expected to benefit from new consumer habits developed over the pandemic.