Low-price competition from Tianjin and Langfang still weighs on demand

• The quarter saw a visible increase in the number of tenants relocating from Beijing to Langfang or Tianjin to reduce leasing costs. Most tenants remained cautious and prioritised low rents when making decisions.
• As rents continued to fall, the current low-rent environment caused some tenants from low-standard projects in Beijing to seek opportunities to upgrade to Grade A projects in Q4 2024. Several new leases of over 5,000 sqm each were completed in Q4 2024.

Market witnesses intensified vacancy pressure

• No new supply entered the market in Q4 2024. However, as several large-space occupiers relocated to surrounding areas and expansion demand was insufficient to backfill space, overall net absorption in Beijing turned from positive to negative in Q4 2024.
• The overall vacancy rate increased by 0.7 ppt to 18.2%. Landlords were under elevated vacancy pressures due to the slower absorption pace, especially in the Daxing and BALP submarkets, which experienced large-area surrenders in Q4 2024.

Landlords give larger concessions on rents

• Overall rent declines widened in Q4 2024, down 2.1% q-o-q and 5.5% y-o-y, the largest drop in five years. Facing weak demand and low-price competition from surrounding areas, more landlords offered bigger rent cuts to attract tenants.
• The Pinggu submarket recorded the largest downward rent adjustment in Q4 2024. Faced with the pressure of significant new supply in Pinggu in Q1 2025, existing projects offered substantial rent discounts to get ahead of the curve and fill vacancies.

Outlook: Rent fall to widen as market continues to tumble

• About 1.57 million sqm of new supply is expected to enter the market in 2025, which is about 42% of the total stock of Beijing’s current logistics market. Of the new supply, 92% will be located in Pinggu, making it the largest submarket in Beijing.
• The rent decline in 2025 is expected to be greater than that of 2024 due to the supply pressure and cautious market sentiment. However, in a market environment of continual rent declines, a faster destocking pace of vacancies is expected in 2025.