Home Industry News Logistics Rents Set To Moderate In 2023

Logistics Rents Set To Moderate In 2023

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According to a global property consultant firm, rent in logistics warehouses throughout Asia-Pacific is anticipated to moderate in 2023 as supply chains start to normalize and demand remains to soften.

The independent global property consultancy firm observed that of the 17 cities it studied, the rental forecast would remain unchanged in five (Beijing, Shanghai, Greater Kuala Lumpur, Manila, and Jakarta).

The property consultancy firm monitors the other 12 cities: Auckland, Brisbane, Sydney, Melbourne, Hong Kong SAR, Bengaluru, Mumbai, Delhi NCR, Singapore, Taipei, Ho Chi Minh City, and Bangkok. These cities are all predicted to see an increase in rental rates.

According to the property consultancy firm, the Asia Pacific logistics market would be generally balanced in 2023, with rental growth expected to moderate compared to the previous two years.

It added that Ho Chi Minh City would have the lowest vacancy rate (1%), Australia is anticipated to have the highest rent rise (12.0%), and India is anticipated to have the largest supply growth (2.8 sqm).

With little more than 8 million sqm of incoming supply and “weakening expansionary demand,” the independent global property consultancy firm noted that vacancies in the region would probably grow significantly.

However, it added that pipeline supply constraints in markets like Sydney, Hong Kong, and Ho Chi Minh City might reduce the decline in vacancies.

On the other hand, the global property consultancy firm cites that recent shipping patterns signal that supply chains are beginning to normalize, reducing some pressure on demand and rent.

But the property consultancy firm added that higher borrowing costs coupled with imminent recession fears due to the aggressive interest hikes could result in a more cost-conscious business environment. Occupiers who adopt the ‘just-in-case’ approach may review their portfolio to consolidate the space they require to minimize capital expenditures as consumers scale back on their purchases and consume more services instead of goods.

Given the ongoing supply-chain challenges and decoupling from the Chinese Mainland, the report stated that businesses in the Asia-Pacific region are also evaluating their needs for logistical spaces and adjusting plans to focus on nearshoring.

The property consultancy firm added that much of the recovery in this sector depends on the Chinese Mainland’s capability to reign as a trade powerhouse and maintain continuous activity in its factories and ports on top of stringent COVID policies.

Businesses continue to rely on the “China Plus One” strategy and diversify production into other markets to avoid further difficulties in supply chains.

In addition to strict COVID laws, the capability of the Chinese Mainland to dominate as a global trade powerhouse and maintain continuous activity in its factories and ports is crucial for this sector’s recovery.

However, the property consultant business highlighted that e-commerce and life science are driving the need in the region; thus, there is still confidence in the APAC logistics sector.

According to the property consultancy firm, as the foundations for the logistics sector in Asia-Pacific are less well-established than in the US or Europe, this has resulted in a severe lack of modern facilities and intense competition.

The global property consultancy firm also identified life science as an emerging bright spot for the region.

Due to post-pandemic behavioral changes, healthcare investment has increased, creating an enormous untapped potential for Asia-emerging Pacific’s life science industry. The property consultancy firm added that every sector of this industry demands more space, including production facilities, research and development (R&D), and logistics for pharmaceuticals.

The property consultancy firm stated that despite the general slowdown in demand, the future for the region’s e-commerce sector is still promising. Although e-commerce demand is returning to normal, the outlook for the Asian-Pacific logistics markets is still positive due to continuous lease demand that will support occupancy levels and moderate rent rise.

A more modest rental increase is viewed since it is more consistent with fundamentals in the post-COVID environment, according to theĀ global property consultancy firm.

It was anticipated that dynamics to remain attractive, as demand will continue to be strong in the manufacturing hubs, supported by ‘China Plus One’ plans and the ongoing structural shortage of prime logistic assets in the area.

The global property consultancy firm further stated that while just-in-case plans could wind down as supply chain disruptions subside, the development of resilience and diversification in supply networks is also unlikely to completely reverse.

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