Guess which city led APAC logistics rental growth in H2 2023

Overall rents in the region grew by 6.2%.

According to Knight Frank’s Asia-Pacific Logistics Markets report for H2 2023, overall prime logistics rents in the Asia Pacific region continued their upward trajectory to grow 6.2% year-on-year in H2 2023, powered by an acceleration in rental growth in Manila. However, the report shows a slowdown in short-term momentum, with a 1.5% increase in rental growth, compared with 4.6% for H1 2023.

Key Highlights of the Asia-Pacific Logistics Markets Report H2 2023:

• Of the 17 cities tracked by the index, 13 cities recorded stable or increased rents in H2 2023, compared with 16 in the prior six months.
• Rental growth was led by Manila, which rose at 39.3% annually and 7.3% from 6 months ago. The rapid expansion of the e-commerce sector fueled the rise.
• Beijing and Shanghai registered notable rental declines as a sluggish economy weighed on demand amid the substantial supply pipeline.

In H2 2023, leasing activity in the Chinese Mainland's logistics sector faced challenges due to a weakened economy and substantial new developments in key markets such as Beijing and Shanghai. The significant slowdown in total trade in 2023 reduced the demand for logistics warehousing space. In response, landlords opted to implement significant rent reductions to facilitate the leasing process and adapt to changing market dynamics.While rents have continued to rise, the structural shortage of quality spaces is expected to constrain growth, resulting in a sharp moderation of rental increases to between 1 to 3% in 2024, compared with the over 6% rise observed in 2023.

​Tim Armstrong, global head of occupier strategy and solutions at Knight Frank, says, "As logistics occupiers continue to dial back on expansionary ambitions, it is becoming apparent that the supply-demand imbalance that had fueled the region’s steep rental growth is waning. However, the Red Sea conflict is a reminder that global supply chains remain vulnerable to disruptions. The region’s ample development pipeline is an opportunity for occupiers to review their logistics footprint. Leasing activity is expected to turn more selective with take-up from occupiers seeking strategically located prime logistics spaces that are automated and compliant with sustainability standards."

Christine Li, head of research, Asia-Pacific adds, " Supply of logistics space will remain considerable in 2024 due to an ample development pipeline and growing sublease availabilities. However, its impact will be uneven across the region. Strong pre-commitments in Pacific markets are keeping vacancies tight while Southeast Asia and India will continue to benefit from supply chain diversification. In contrast, Chinese mainland markets will likely require some time to absorb a substantial pipeline given the sluggish economy. While appetite for expansion among logistics occupiers have cooled, demand fundamentals in the region remain robust. Global trade and production converge in the region while the need for supply chain resilience will continue to underpin demand."

Markets Table H2 2023: