Manila Leads APAC Logistics Rental Growth in H2 2023

In the latter half of 2023, the Asia-Pacific region witnessed a commendable growth in prime logistics rents, as outlined in Knight Frank’s Asia-Pacific Logistics Markets report for H2 2023. This period marked a notable surge of 6.2% in overall rents, underscoring the resilience and dynamism of the regional logistics sector. Notably, Manila emerged as the frontrunner in rental growth, experiencing a remarkable surge of 39.3% annually and 7.3% over the preceding six months. This significant uptick in rental rates was primarily attributed to the rapid expansion of the e-commerce sector in the region, signaling a shifting landscape in consumer behavior and logistics demand.

The report’s findings revealed intriguing trends across the 17 cities monitored in the index. While 13 cities reported stable or increased rents in H2 2023, indicating a positive trajectory compared to the previous six months, Beijing and Shanghai faced notable declines in rental rates. These declines were attributed to a sluggish economy and an influx of supply in the market, highlighting the delicate balance between demand and supply dynamics in the logistics real estate sector.

Furthermore, challenges were observed in the Chinese Mainland’s logistics sector, where weakened economic conditions and substantial new developments impacted leasing activity in key markets such as Beijing and Shanghai. Despite these challenges, the region’s logistics occupiers are recalibrating their expansion strategies in response to evolving market conditions. Tim Armstrong, Global Head of Occupier Strategy and Solutions at Knight Frank, remarked, “The region’s logistics occupiers are recalibrating their expansion strategies, reflecting a gradual easing of the supply-demand imbalance that previously fueled steep rental growth.”

Looking ahead, the outlook for the Asia-Pacific logistics market remains dynamic yet nuanced. Despite the upward trajectory in rents, the structural shortage of quality logistics spaces is anticipated to temper growth in the coming year. Rental increases are expected to moderate sharply to between 1% to 3% in 2024, compared to the over 6% rise witnessed in 2023. This moderation reflects the need for a balanced approach to market dynamics, ensuring sustainable growth and stability in the long term.

Christine Li, Head of Research, Asia-Pacific, further emphasized the regional variations in supply and demand dynamics. While an ample development pipeline and growing sublease availabilities are expected to contribute to considerable supply of logistics space in 2024, regional dynamics vary. Strong pre-commitments in Pacific markets are keeping vacancies low, while Southeast Asia and India continue to benefit from supply chain diversification. Conversely, Chinese mainland markets may require additional time to absorb the substantial pipeline, given prevailing economic challenges.

In conclusion, despite a cooling appetite for expansion, robust demand fundamentals persist in the region, driven by global trade dynamics and the imperative for supply chain resilience. As the Asia-Pacific logistics market continues to evolve, strategic planning and adaptability will be essential for stakeholders to navigate the complexities and capitalize on emerging opportunities in this dynamic sector.