Singapore takes the lead in Asia-Pacific logistics rental growth amid regional moderation

Singapore has established itself as a top performer in the Asia-Pacific logistics market, with logistics rents rising 10.8% year-on-year—the highest increase recorded in ten years. The growth is largely driven by the strength of Singapore's manufacturing sector, which has seen the Purchasing Managers' Index expand consecutively over the last ten months. Looking ahead, forecasts project a continued upward trend, with prime logistics rents expected to rise by 3% to 5% for this year as international manufacturers increasingly view Singapore as an attractive location for operational expansion.

Despite Singapore's overall positive trend, the broader Asia-Pacific region has shown signs of moderation, with a mixed performance across markets.

In H1 2024, 14 out of 17 tracked cities across Asia-Pacific recorded stable or increasing rents year-on-year, reflecting a marginal improvement from six months ago. Rental rates for logistics spaces continued their upward trend, although at a slower pace. The average year-on-year rental growth in H1 2024 was 2.4%, a significant deceleration from the 6.2% increase observed in 2023.

Chinese Mainland cities Beijing and Shanghai faced significant headwinds, experiencing a 13.5% decline in rentals due to a slowdown in business activity. Vacancy rates in these cities climbed to over 20%, prompting landlords to implement rental reductions and offer shorter lease terms to attract tenants. The substantial construction pipeline in the Chinese Mainland, with over 17 million square meters of new supply expected to come online, will likely further weigh on market conditions for the rest of 2024.

On average, logistics rents across Southeast Asia rose by 2.5% on average from six months ago, driven by increases in key markets in the region.

In Vietnam's Southern Key Economic Region (SKER) region, rental rates climbed over 5% from the previous six months. This growth can be attributed to ongoing infrastructure development, expansion of the e-commerce sector, and continued growth in manufacturing activities.

In the Philippines, particularly Metro Manila, strong demand for cold storage facilities prompted major industrial developers to expand their offerings in this specialised segment of the logistics market. Malaysia’s greater Kuala Lumpur region maintained stable rental rates during this period. However, the market is poised for change, as higher development costs are expected to exert upward pressure on rents, leading to marginal rent growth in the near future.

The warehousing market in India has experienced significant changes since the onset of the pandemic, with notable trends emerging in key markets such as Bengaluru, Mumbai, and the National Capital Region (NCR). Despite a moderation in occupier activity since the record highs of FY 2023, rent growth in Bengaluru, Mumbai, and NCR has maintained its upward trajectory in H1 2024. Several factors are expected to help maintain rent levels for the remainder of the year, such as high development costs, healthy demand from the manufacturing sector, and the continued expansion of third-party logistics providers, reflecting the ongoing growth of e-commerce and supply chain optimization efforts.

More of the report can be found here https://apac.knightfrank.com/logistics-highlights