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Logistics demand normalised faster than expected in H1 2024. Despite improved availability, occupiers retain a preference for renewals over relocations due to high rents and fit-out costs. Expansionary demand is increasingly being driven by smaller size requirements.
Demand from 3PLs and e-commerce softened in H1 2024 but activity from manufacturing-related occupiers continued to strengthen; a trend that led to a slowdown in warehouse leasing across the region.
CBRE expects a mild improvement in leasing activity in the second half of the year, supported by landlords’ more accommodative stance. Full-year leasing volume will nevertheless be weaker than in 2023.
Mid-year review
Logistics occupiers’ appetite for expansion will moderate further in 2024. To protect their bottom line against high accumulative rental growth and the softer economy, occupiers will give closer scrutiny to real estate plans and capital expenditure; a trend that will result in more lease renewals.
Forecast made in January 2024
Demand to normalise
Forecast Accuracy
The absorption of new supply, much of which is in submarkets located far from urban areas, is being constrained by occupiers’ preference for assets in core areas as well as high relocation costs. Pre-leasing activity in new projects in Australia and Greater Tokyo has moderated.
Vacancy has increased across the region, with that in mainland China, Greater Seoul and Vietnam rising to record highs. The substantial H2 2024 development pipeline of 93 million sq. ft. is set to push up vacancy further over the remainder of the year.
Mid-year review
With more occupiers seeking prime core logistics space served by modern transport networks and in compliance with logistics technology upgrades and/or sustainability requirements, more leasing activity in 2024 will be driven by upgrading demand.
Forecast made in January 2024
More demand for flight-to-core and quality properties
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The regional logistics leasing market is gradually shifting in favour of tenants. Rental performance is increasingly bifurcated, with rental growth confined to tightly-held precincts.
Regional effective rental growth has decelerated faster than expected, as incentives such as rent-free periods and CapEx contributions become more commonplace. With intense competition for tenants set to push up incentives even further, CBRE has downgraded its 2024 regional logistics rental outlook.
Mid-year review
Availability is projected to increase this year on the back of the ample development pipeline and growing volume of sublease space. Vacancy pressure will be unevenly distributed as new supply is often concentrated in submarkets located far from urban areas. Landlords will therefore have to offer more incentives to induce expansion, eroding rental growth on a net effective basis.
Forecast made in January 2024
Rents to come under pressure as vacancy rises
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