APPD Market Report Article

Shanghai

February 28, 2022

3.7%

RMB 1.53

Growth
Slowing

Demand grows in 2021 after showing resilience amid pandemic

  • Net absorption in 4Q21 totalled 80,000 sqm. While this was down from the previous two quarters, absorption for 2021 overall reached a record high of 660,000 sqm, reflecting growth in demand as China and Shanghai’s economies recovered from the pandemic.
  • 3PLs continued to lead demand for Shanghai’s logistics space, as we witnessed both domestic and international 3PLs leasing new space or renewing leases this quarter. For example, SF Express and Deppon Logistics committed to leasing space in Jinshan submarket.

Vacancy rises amid record quarterly supply

  • 2021 was a record year of supply, with more than 900,000 sqm delivered across the year and nearly 50% delivered in 4Q21. The delivery of Forest Fengxian Logistics Park, New Ease Galaxy and New Ease Songjiang made 4Q21 the record quarterly supply. These projects achieved moderate pre-commitment rates with more leasing enquiries under way.
  • Vacancy rose from 4.4% to 9.7% as a result of the quarter’s large new supply. Excluding the effect of the quarter’s new supply, vacancy rates (3.6%) in other projects fell below 3Q21 level. Further, the year ended with vacancy only slightly above its 4Q20 level of 8.1%, reflecting the influence of strong demand amid this year’s record supply.

Strong leasing supports further growth in rents

  • Strong demand and leasing momentum helped rents maintain their rising trajectory despite the quarter’s large new supply. Rents rose 1.1% q-o-q in 4Q21 to reach RMB 1.53 per sqm per day. Rents were up 3.7% for the year as a whole, with all submarkets recording increases.
  • CapitaLand purchased a portfolio of China warehouses from QuadReal/LaSalle for RMB 1.68 billion (USD 260 million). The portfolio includes properties in Shanghai, Kunshan, Chengdu, and Wuhan. Investor sentiment for China logistics assets remains strong, especially in core logistics hubs like Shanghai.

Outlook: 3PLs to remain the market’s leading demand driver

  • Traditional drivers like 3PLs and e-commerce firms will continue to drive Shanghai’s logistics demand. Meanwhile, expansion by emerging sectors like cold chain and advanced manufacturing is expected to continue, given consumers’ rising expectations on food quality and the local government’s increasing focus on high-end manufacturing.
  • Although the new supply in the coming year is expected to reach a similar level to 2021, the strong demand is likely to continue to fuel the steady rental growth.

Note: Shanghai Logistics & Industrial refers to Shanghai's modern warehouse facilities.

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