WHILE rents for logistics spaces in the Asia-Pacific region continued to rise in the first half of 2024, rental growth has moderated, said Knight Frank in a report on Wednesday (Aug 7).
Average rents in the region climbed by 2.4 per cent on the year in H1 2024, representing a slowdown from the 6.2 per cent increase clocked in 2023.
This came as business activities on the Chinese mainland slowed down, which led to a 13.5 per cent decline in rentals in Beijing and Shanghai, said Knight Frank.
Beijing and Shanghai are part of the 17 cities tracked by Knight Frank. Other cities include Singapore, Melbourne, Hong Kong, Mumbai.
As a result of business activities slowing down, vacancies in both markets have risen to more than 20 per cent and landlords – in a bid to attract and retain tenants – have cut rents and shortened leases, said the report.
Knight Frank pointed out that this situation is likely to become worse as more warehouses are being built in Chinese mainland markets.
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On the other hand, the other markets in Apac tracked by Knight Frank recorded stable and rising rents for the half-year period, with Singapore being the top performer.
Logistics rents in the Republic rose 6.7 per cent in the half-year period and 10.8 per cent year on year. This represented the highest growth it recorded in 10 years, the report indicated.
Knight Frank pointed out that the growth was mainly driven by Singapore’s strong manufacturing sector, as its overall purchasing managers’ index has expanded consecutively in the last decade.
Additionally, top-tiered rents in Singapore reached a record high of S$2.88 per square foot per month amid renewed demand for cold storage space, thus driving growth, it added.
“This strong performance is expected to continue, with forecasts projecting a 3 to 5 per cent increase in prime logistics rents for 2024, as international manufacturers continue to view Singapore as an attractive location for their overseas operational expansion plans,” it said.
Looking forward, Knight Frank believes that rent growth will remain moderate in the second half of the year.
It highlighted that occupiers in some markets have started exploring the option to purchase warehouse spaces rather than leasing, to mitigate rising rents and secure their tenures on the properties.
Tim Armstrong, global head of occupier strategy and solutions, said: “Constrained by the fragile economic outlook and challenging operating conditions, occupiers will continue to scrutinise space requirements.”
He also said that occupiers are likely to be more discerning when considering expansion spaces. “Leveraging technology and strategically aligning logistics footprints will remain key priorities.”
