_Asia-Pacific logistics H2 2024: Stable fundamentals amid slowing growth

The Asia-Pacific logistics market experienced a significant deceleration in 2024, with average rental growth of just 0.2% year-on-year - a marked slowdown from the strong 7.0% growth recorded in 2023. Despite this cooling trend, most markets maintained stability, with 14 of 17 tracked cities registering either stable or increasing rents in the latter half of 2024.

Australasia: Rebalancing market dynamics

Melbourne emerged as the regional leader for rental growth in 2024, posting an impressive 6.7% increase. This growth was particularly pronounced in the established East and Southeast precincts, where limited development land has constrained new supply.

However, rising availability across Brisbane, Melbourne, and Sydney have restored a more balanced tenant-landlord relationship—a trend expected to continue into 2025 with approximately 2.5 million square metres of new space scheduled for delivery. While incentives are gradually returning to the market, demand is expected to stabilize as economic growth and retail spending improve, accelerating import volumes.

Auckland's market has similarly reached a more balanced state due to increased vacant spaces and sublease opportunities, primarily resulting from reduced freight movements affecting logistics operators' space requirements.

Southeast Asia: Varied performance with Greater Kuala Lumpur leading

Logistics rents across Southeast Asia rose by an average of 1.1% year-on-year, with Greater Kuala Lumpur demonstrating the strongest momentum in H2 2024. The completion of higher-quality industrial properties pushed rents up by 5%, albeit from a relatively low base. The development of new large-scale industrial townships is expected to intensify competition, likely keeping rents stable throughout 2025.

In Jakarta, demand from e-commerce, EV-related industries, 3PL providers, and the FMCG sector drove rents to a 3.8% annual increase. Vietnam's Southern Key Economic Region continued to benefit from infrastructure development, e-commerce growth, and manufacturing expansion. However, rental growth decelerated significantly in the latter half of the year as more modern warehouses came online in Dong Nai and Long An.

East Asia: Supply challenges in key markets

Beijing and Shanghai faced significant challenges in 2024, with rents plunging 14 to 15% due to a substantial development pipeline exceeding 1.5 million square meters and weak demand. The outlook for 2025 appears challenging, with new supply expected to reach over 4 million square meters between these two cities – with over two-thirds concentrated in Beijing's Pinggu District. This surge in supply will likely push vacancy rates to nearly 30% in both markets, exerting considerable downward pressure on rents.

Beijing's market faces additional headwinds from new logistics developments in neighbouring Langfang and Tianjin, which may divert demand. Similarly, Hong Kong's modern logistics facilities are expected to see declining rents due to softening demand.

India: Continued strength backed by manufacturing growth

India's warehousing market has stood out over the past two years. As manufacturing demand has filled the void left by e-commerce, and with 3PL players continuing to anchor the market, rents in Bengaluru, Mumbai, and the NCR rose by an average of 2.1% through 2024 despite increasing vacancy rates.

Looking ahead, robust GDP growth forecasts are expected to maintain a dynamic business environment and support strong occupier activity throughout 2025. With approximately 2 million square meters of new space becoming available in 2025, supply should adequately meet anticipated demand.

Outlook for 2025: Stability with moderate growth

As we move into 2025, cost management and supply chain optimisation will remain key considerations for occupiers across Asia-Pacific. While some occupiers work through excess capacity and explore options to optimise their footprints, underlying demand for prime logistics spaces is expected to remain healthy, with leasing volumes keeping pace with new supply.

The average vacancy rate across the region is projected to remain broadly stable, with an anticipated moderate rent growth of under 2%. This suggests a market that, while not experiencing the dramatic increase of previous years, continues demonstrating resilience and opportunity for strategic investors and occupiers alike.

The full report can be found here.