Net absorption fell significantly in 1Q24 because of seasonal factors and subdued sentiment. 

Tier 1ª cities saw a drop in net absorption of around 688,000 sqm, in contrast to the 1.7 million sqm in 4Q23. This represents the lowest reading since 4Q19. With the exception of Singapore, activity slowed considerably across most of these tier 1 cities.

Beijing's activity slowed down during the Chinese New Year, compounded by weak sentiment. The holiday period resulted in fewer enquiries, while competition from Langfang and Tianjin added further pressure to the market. Seasonal effects also impacted Shanghai. Although net absorption declined from the previous quarter, demand and sentiment were generally more stable. Demand wavered in Hong Kong, with slowing activity from domestic groups. Among the limited new leases, most came from 3PL occupiers.

In Tokyo, e-commerce groups, 3PL players, and retailers (excluding supermarkets and drug stores) dominated demand. The pre-commitment rate for the next 12 months dropped to around 30%, down from the previous 40%. New completions continued to support take-up in Seoul. Leasing demand for some of these new completions attracted tenants from various industries, including cosmetics and fashion tenants.

New enquiries eased in Singapore.

Nonetheless, available pockets of space arising from non-renewals or pre-termination were quickly taken up by occupiers with immediate space needs. Activity fell in both Sydney and Melbourne. High rents and limited availability restricted greater take-up.

Slowing rental growth

Rental growth continued to decelerate, as weaker demand and high vacancy rates hindered landlords' ability to raise rent levels. The pressure on rents was most evident in Greater China, where quarterly rents declined once again in 1Q24 due to low occupier sentiment and ongoing macroeconomic challenges.

Despite an increase in supply, Tokyo recorded marginal rent growth. This was driven by upward pressure from rising land prices and persistently high construction costs. However, incentives are growing as vacancy levels continue to rise. Seoul rents rose modestly over the quarter, while Singapore rents maintained its upward trajectory for the 12th consecutive quarter. Still-low vacancy rates coupled with steady demand pushed both Sydney and Melbourne rents higher in 1Q24.

Patchy capital market activity

Investment activity throughout the region remained inconsistent, with many investors adopting a selective approach because of still high debt costs. There was a scarcity of major deals across Greater China. Beijing and Shanghai saw no significant transactions, while Hong Kong investment volumes were again down on a q-o-q basis.

By JLL Asia Pacific Logistics and Industrial - Q1 2024 

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