SINGAPORE: The Asia-Pacific logistics sector is navigating shifting tides as rental growth slowed sharply to just 0.2% in 2024, a steep decline from 7.0% in 2023, according to Knight Frank’s latest Asia-Pacific H2 2024 Logistics Highlights report. The slowdown underscores widening disparities across the region, with China grappling with oversupply while Southeast Asia emerges as a bright spot for growth.
Diverging Market Trends: China vs. Southeast Asia
While 14 out of 17 tracked cities posted stable or increasing rents, the overall pace of growth masked stark regional contrasts. Beijing and Shanghai saw rents plummet by 14% to 15% amid a surging supply pipeline set to exceed 4 million sqm in 2025. Vacancy rates in both cities are projected to reach nearly 30%, putting sustained pressure on rents.
Conversely, Southeast Asia bucked the trend, with Greater Kuala Lumpur leading the region in half-yearly rental growth of 5%. The city benefited from an influx of high-quality industrial spaces and strong e-commerce demand. Melbourne also outperformed with a 6.7% rental increase, fueled by land scarcity in key submarkets.
Geopolitics and Supply Chain Realignments in 2025
The logistics sector faces further headwinds as global trade dynamics shift. With the potential for increased tariffs under a second Trump administration, supply chains are expected to realign more aggressively within Asia-Pacific and beyond.
“As the world braces for Trump 2.0, manufacturers are doubling down on China-plus strategies,” said Tim Armstrong, Global Head of Occupier Strategy & Solutions at Knight Frank. “Southeast Asia and India are emerging as prime alternatives for companies looking to diversify their manufacturing and logistics footprint.”
The Road Ahead: Stability Amid Market Adjustments
Despite ongoing fluctuations, the Asia-Pacific logistics sector is expected to find equilibrium in 2025, with leasing volumes keeping pace with new supply. Prime logistics spaces—particularly those in well-connected hubs—are projected to maintain steady demand.
“A flight-to-quality trend will continue to shape the sector, with occupiers focusing on modern, well-located logistics facilities,” said Christine Li, Head of Research, Asia-Pacific at Knight Frank. “Beyond China, most markets will experience balanced demand-supply conditions, supporting moderate rent growth of up to 2%.”
Key Market Trends for 2025
- Market dynamics shifting from landlord-favorable to neutral conditions
- Leasing volumes expected to match new supply, stabilizing vacancy rates
- Strategically located logistics hubs to benefit from geopolitical shifts
As Asia-Pacific’s logistics landscape continues to evolve, well-connected industrial hubs with proximity to major trade routes will be best positioned to weather uncertainty and sustain long-term demand.
