Cost-saving relocations dominate leasing demand

• Despite the limited incremental leasing demand, the number of market transactions remained stable in the quarter. The rent gap between lease renewals and new leases has widened, leading to more cost-saving relocations in Q3 2024.
• Leasing performance was relatively moderate in the BDIA and Yongledian areas. Leveraging their pricing advantages, these two areas recorded a total of over 10,000 sqm of new leasing transactions during the quarter.

Vacancy rises as absorption momentum slows

• One new project in the TLP submarket, with a total GFA of about 95,000 sqm, entered the market in Q3 2024. Supported by the large self-use areas, the absorption performance at the new project was relatively good, recording a vacancy rate below 15%.
• The overall vacancy rate increased by 1.7 percentage points to 17.5%. Overall net absorption was 17,000 sqm, mainly offset by negative take-up in the Daxing submarket and Miyun District, which totalled more than -70,000 sqm.

Landlords continue to lower rents under vacancy pressure

• Average rent in the market declined -1.5% on a q-o-q basis and -4.1% y-o-y. Tenants remained cost-conscious, wanting to allocate smaller budgets to warehouse leasing. Most landlords started to provide further rent reductions to attract tenants.
• The TLP submarket, where rents had previously been stable in 2024, saw a decline of 0.7% q-o-q in Q3 2024. Some landlords, noticing limited improvement in occupancy in the TLP submarket this year, started to offer rent concessions to entice tenants.

Outlook: The trend of cost-saving relocations is likely to persist

• Amid the slow economic recovery, incremental leasing demand is gradually shrinking. Cost-saving relocations are expected to remain the main leasing demand source. Thus, landlords are likely to keep softening rents to attract rent-sensitive tenants.
• On the supply side, nearly 1,330,000 sqm of new supply is expected to enter the market in the next 12 months. The extreme supply pressure coupled with weak demand will most likely lead to a spike in the overall vacancy rate.