Knight Frank, the renowned global real estate adviser, has unveiled its much-anticipated Asia-Pacific Logistics Markets report for H1 2023. The findings? A resilient logistics real estate market that’s defying economic headwinds.
Manila Leads the Charge
The report, which meticulously tracked prime logistics rent across 17 pivotal cities in APAC, showcased an impressive average rise of 10.4% year-on-year. Manila, with its booming e-commerce sector, emerged as the star, driving this significant growth.
Overcoming Economic Hurdles
Despite the economic challenges shadowing this period, the logistics real estate market’s ascent is undeniable. This growth trajectory is attributed to the unwavering demand from e-commerce platforms, third-party logistics (3PL) entities, and manufacturing giants. This, even as the GDP growth in the Chinese mainland wavers and global economic predictions remain uncertain.
Key Takeaways from the Report:
- SEA Cities Shine: While most Southeast Asian cities showcased stable or even improved rents, Manila’s e-commerce-driven demand propelled it to record the highest rental growth year-on-year in the Asia-Pacific.
- Chinese Mainland’s Predicted Softening: An impending surge in supply might lead to softer rents in Beijing and Shanghai, aligning with anticipated rising vacancy rates throughout 2023.
- Jakarta’s Unique Stance: Jakarta stands out, resisting the broader regional trend with its declining rents. However, a subtle shift is evident as its half-yearly rental growth decreased to 4.8% from 5.3% six months prior.
- E-commerce’s Evolving Demand: As e-commerce demand stabilizes, the emphasis has shifted towards optimizing logistics footprints. This has spurred the demand for state-of-the-art facilities, especially in strategic locations.
Forecast for H2 2023
The report predicts a continued demand for quality spaces, potentially driving rent hikes. However, the cautious stance of occupiers might moderate this growth pace.
Expert Voices
Tim Armstrong’s Analysis, global head of occupier strategy and solutions, Asia-Pacific at Knight Frank: “Even as the Asia-Pacific logistics sector continues to be characterised by resilient demand, underpinned by the long-term appeal for quality spaces, we see the pace remaining restrained by a cautious occupier base. In the medium term, rising interest rates and slowing growth remain key concerns for the region, impacting consumer spending and consumption. Consequently, businesses are expected to maintain reduced inventory levels and streamline their supply chains, leading to a moderation in sector demand and creating prospects for sub-leasing.”
Christine Li’s, head of research, Asia-Pacific at Knight Frank: “Conditions within the Chinese mainland market are displaying a divergence from the rest of the region, as its economy continues to underperform. However, this is counterbalanced by more positive sentiment in other areas, where the growth in demand outpaces the supply of new units. Long-term structural fundamentals also continue to underpin demand in emerging Southeast Asia markets, alongside India, which is progressively gaining significance within the global manufacturing supply chain. Overall, the region’s logistics sector remains in adjustment mode, as e-commerce demand continues to adapt to a new cycle in the post-pandemic environment, which will persist into the second half of 2023. We expect supply-side induced rental increases to moderate as occupiers adopt a more selective approach and prioritise future-proofing their logistics footprints.”
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Allan Sim’s Observations, executive director of Land & Industrial Solutions, Knight Frank Malaysia, said: “It is interesting to see the growth of activity in the manufacturing services and primary sectors, as evidenced by the total investment of RM71.4 billion approved in the first quarter of 2023. With the “China Plus One” strategy that is now gaining momentum, coupled with the ongoing geopolitical tension, we are witnessing an increase in FDIs especially from the manufacturing sector, stimulating demand for industrial spaces, as exemplified by Tesla’s commitment to establish a head office and Tesla Experience Service Centre under MITI’s Battery Electric Vehicle (BEV) Global Leaders initiative. This has stimulated further growth in the industrial market supply and we should be seeing positive impact on the industry market this year.”
The Asia-Pacific logistics real estate market is in a transformative phase, with various dynamics at play. As these trends continue to unfold, Marketing In Asia remains committed to bringing you the most exclusive and insightful stories from the industry’s frontlines.
