Most markets recorded flat to modest rental growth in H1 2026. Greater Tokyo rents experienced an expedited recovery amid falling vacancy. Mainland China, Hong Kong SAR and selected Pacific cities saw rents decline amid landlords' softer stance. Leasing momentum was driven by cost-conscious renewals and relocation, with tenants selectively expanding or upgrading to well-located or newly completed assets.
Surprise: Stronger-than-expected export activity driven by robust AI-related demand largely negated the impact of the Middle East conflict in H1 2026. However, ongoing geopolitical volatility may prompt occupiers to adopt a wait-and-see approach.
Mid-year review
While most markets will still see rising logistics rents, upward momentum will slow as occupiers implement more selective expansion strategies amid softer regional economic growth. Tenants will prioritise renewals and consolidation to prime assets near city centres rather than aggressively extending their footprint. Incentives and landlord flexibility will remain prevalent in supply-laden markets.
Forecast made in January 2026
Capitalise on moderating rental growth
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New supply will remain elevated in selected mature markets in 2026 before pressure begins to ease. The volume of new stock in mainland China, Japan and Australia is expected to fall from 2027 as developers scale back projects more aggressively than anticipated amid softer market conditions. Elevated land costs in key Indian cities such as Mumbai and Delhi are likely to limit new developments in prime locations.
Alert: Vacancy is bifurcated. Prime warehouses in inner-city submarkets continue to attract demand and outperform the broader market, particularly in mainland China, Korea and selected Australian cities. In contrast, legacy stock and assets in outer locations face greater vacancy pressure.
Mid-year review
Following a strong wave of completions between 2023 to 2026, new stock is set to fall sharply from 2027 onwards as developers adjust to slower rental growth. The surge in construction and land costs, coupled with elevated financing expenses, will curb new development in Australia, Korea, and India. While short-term supply pressure will persist over the next 24 months, particularly in mainland China, the medium to longer-term outlook points to tightening availability, which could restore landlord confidence and underpin a rental recovery.
Forecast made in January 2026
Prepare for the end of the supply glut
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3PLs and e-commerce operators have grown increasingly cost-sensitive under the uncertain macroeconomic backdrop, putting automation and smart system investment on hold. Demand for large-floorplates suited to future upgrades has held up, however, as occupiers look to retain optionality without immediate capital commitment. This preference is likely to become more prevalent in the medium term as cost pressures ease.
Alert: 3PLs' and e-commerce operators' thinning operating margins warrant close monitoring as prolonged cost pressure risks further delaying the automation upgrading cycle.
Mid-year review
The pursuit of greater operational efficiency and cost control by 3PLs and e-commerce operators will generate strong demand for modern, automation-ready logistics facilities with large floorplates. Beyond robotics integration and automation, occupiers are advised to leverage real time data and smart systems to accurately identify optimal warehouse locations to meet rising delivery expectations.
Forecast made in January 2026
Seek automation-ready warehouses
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Supply chain diversification remains a structural and ongoing process. Southeast Asian markets have shown strong resilience, buoyed by the electronics upcycle and front-loading activity in a relatively stable tariff environment. Robust manufacturing demand has stimulated occupier expansion across these markets, tightening the availability of factory land and ready-built space.
Alert: Several markets have yet to finalise bilateral trade agreements with the U.S., leaving occupiers exposed to further uncertainty and reinforcing the need for supply chain diversification.
Mid-year review
Adoption of supply chain diversification and nearshoring strategies will accelerate as enterprises seek to reduce operational vulnerabilities by mitigating tariff uncertainty and geopolitical risk. Emerging markets in India and Southeast Asia stand to benefit by offering skilled labour, lower costs and logistics infrastructure upgrades.
Forecast made in January 2026
Strengthen supply chains amid trade uncertainty
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