Warehouse rents remain stable in most Asia-Pacific countries

Asia-Pacific warehouse rents growth expected to average between 3% to 5% 

Knight Frank in September 2020, released its Asia-Pacific Warehouse Review which tracked prime Asia-Pacific warehouse rents across 17 key cities, registering an average change of -0.02% half-on-half despite COVID-19. Going forward, Knight Frank expects average rental growth between 3% to 5%.

Asia-Pacific warehouse rents

Asia-Pacific warehouse rents hold firm amidst COVID-19 (Image credit: Knight Frank)

Highlights of Asia-Pacific Warehouse Rents:

  • Asia-Pacific warehouse rents market conditions for 16 of the 17 cities tracked are expected to remain stable or improve over the next 12 months. The positive outlook for growth in the second half of 2020 is due to higher space appetite from e-commerce players and essential commodities.
  • Tokyo recorded the highest half-on half rental growth at 4.2%, due to healthy take up rates and the lack of available prime assets within the city.
  • Shanghai warehouse markets recorded the healthiest rental growth compared to Beijing and Guangzhou, at 3% half-on-half, led in part by a pickup in storage demand from cold chain operators.

Tim Armstrong, Head of Occupier Services & Commercial Agency, Asia Pacific at Knight Frank says, “The outlook for industrial markets remains resilient due to robust demand from the e-commerce and essential goods sectors, as well as additional requirements for inventory storage to mitigate supply chain disconnects.”

Daniel Ding, Head of Capital Markets for Land & Building, International Real Estate & Industrial, Knight Frank Singapore, shares, “It has become clear that the winner coming out of this health crisis is very much some specialist sub-sectors within the industrial asset class, including institutional-grade warehouses. We expect rents to stabilise and gradually trend upwards in the coming months.”

Asia-Pacific Prime Warehouse Rents

City

USD/sq m/month

6-month % change (H2 2019 – H1 2020)

Forecast next 12 months

Brisbane

                    6.5

-0.4%

 Stable

Melbourne

                    5.8

0.0%

 Stable

Sydney

                    7.0

0.0%

 Stable

Tokyo*

                  12.8

4.2%

 Stable

Beijing

                    8.3

-2.5%

 Stable

Guangzhou

                    5.4

-1.8%

 Stable

Shanghai

                    6.8

3.0%

 Increase

Hong Kong

                  26.2

-3.4%

 Decrease

Taipei

                  11.8

0.9%

 Increase

Bengaluru

                    2.8

0.0%

 Increase

Mumbai

                    3.4

0.0%

 Increase

NCR

                    3.4

0.0%

 Increase

Jakarta

                    4.5

0.0%

 Stable

Kuala Lumpur

                    4.8

0.0%

 Stable

Singapore

                  13.8

-0.6%

 Stable

Bangkok

                    5.1

0.2%

 Stable

Manila

                    4.7

0.0%

 Stable

 Source: Knight Frank Research / *Sanko Estate

Industrial property market emerged one of the most resilient across the property sectors says a recent analysis of JTC Q2 2020 Industrial property statistics.

Ms Tricia Song, Colliers International’s Head of Research for Singapore, commenting analysing that industrial property market emerged among most resilient sectors from the JTC Q2 2020 Industrial property statistics said:

“The Singapore industrial property market emerged one of the most resilient across the property sectors (retail, office, hotel, residential), amid the global coronavirus (COVID-19) pandemic, as seen by continued warehouse demand supported by the accelerated adoption of e-commerce and government’s stockpiling of essential goods.

“That said, overall industrial rental and price declines were more pronounced in Q2 2020 than in Q1 2020, capturing the ground sentiments and impact of COVID-19 Circuit Breaker measures which started on 7 April 2020. With the rapidly evolving COVID-19 situation, the industrial sector is likely to experience continued pressures on rents and prices, as with other sectors.

“Singapore all-Industrial property market rents declined 0.7% quarter-on-quarter (QOQ) in Q2, dragged by single-user factory. Business parks held up best but still declined 0.2% QOQ. Despite the weakness in rents, overall occupancy rate, however, rose marginally to 89.4% from 89.2%. Meanwhile, prices of industrial properties saw a decline of 1.1% QOQ, attributing largely to the 1.5% QOQ decline seen in multi-user factories.

“Overall, we are cautious about Singapore industrial market’s outlook for this year, and forecast the general industrial market to remain weak in 2020.

“The business park and high-specs segments could be more resilient, benefiting from Technology sector. Warehouses could see support from the rise in e-commerce driving demand for logistics services, and are also well-positioned for any economic rebound.”

Rents and Occupancy Rate
The All-Industrial rental index declined at an increasing rate, registering a -0.7% QOQ growth, dragged largely by single-user factory (-1.0%) and warehouse (-0.7%). This came after a 0.1% decline in Q1 2020. This also marks the highest quarterly decline since Q3 2017, and brings the All-Industrial rental index to a level at 14.2% below the peak in Q2 2014.

However, overall occupancy rates improved 0.2 percentage point (ppt) to 89.4% in Q2 2020 from 89.2% in Q1 2020, mainly due to an 0.8 ppt increase in warehouse space; more space was leased due to stockpiling and storage during the quarter. Other segments saw a decline in occupancy levels, with business parks falling the most.

Factory

The single-user factory segment saw rents declining 1.0% QOQ which helped pushed up occupancy by 0.4 ppt  to 91.1% (+0.4 ppt). While rents of multi-user factories held up slightly better at -0.5% QOQ, occupancy declined by 0.4 ppt to 87.5%. All planning regions saw a decline in rents, with the worst decline seen in the East at -2.1% QOQ.

Business Park

Business Park rents held up best among all segments, with only a marginal decline of 0.2% QOQ in Q2 2020. That said, this is the first rental decline seen for business parks since Q4 2018, as the global COVID-19 pandemic dampened business sentiment and leasing activities in business parks and high-spec spaces. Occupancy rate also declined by 0.7 ppt QOQ to 85.2% as businesses paused expansion activities and net new demand remained negative for the second consecutive quarter.

Warehouse

Warehouses saw a surge in net new demand to 1.3 million sq ft from -125,000 sq ft in Q1 2020, as the pandemic resulted in national stockpiling of essential goods and accelerated e-commerce growth. Lower rents (-0.7% QOQ) in Q2 2020 drove occupancy up by 0.9 ppt to 88.3%.

Prices

The All-Industrial price index fell 1.1% QOQ in Q2 2020, dragged by the multi-user factory segment which saw a -1.5% QOQ decline, while single-user factory also witnessed a -0.6% QOQ decline.

Colliers notes that the price index for multiple-user factory has not seen an improvement for seven consecutive quarters. Prices in all planning regions fell in Q2 2020, with the West and North region seeing the largest drop at -4.0% QOQ and -3.5% QOQ respectively.

The post Warehouse rents remain stable in most Asia-Pacific countries appeared first on iCompareLoan Resources.

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