Rental growth slows on new logistics services across Asia-Pacific region
Rental growth slows on new logistics services across Asia-Pacific region
In the first quarter this year the Asia Pacific region saw demand for logistics space being driven by third party logistics suppliers (3PLs), e-commerce, and automotive manufacturers, according to a report released by property consultant CBRE last week.
There is a projected 65.6 million square feet of new logistics warehouse space being built in 2015, and a majority of this will be in Seoul (20 per cent), Shanghai (20 per cent), and Tokyo (17 per cent).
This year's upcoming supply pipeline may result in rental rates moderating if there are signs of slowing demand. Coming off a record year of warehouse completion, the Singapore and Melbourne markets continue to digest the new supply, impeding rental growth.
The steady increase in new supply continued to dampen the strong regional rental growth witnessed over the past four years. The CBRE Asia Pacific Logistics Rental Index increased by 1.1 per cent year-on-year in Q1 2015, the slowest annual growth since Q1 2010.
The Philippines continued to be the fastest growing manufacturing country in the region, with industrial production forecast to increase by 10.8 per cent in 2015, while Viet Nam recorded steady growth despite a slight fall in employment in March.
These economies continue to offer lower costs and cheaper labour and as a result are attracting electronics and textile production to relocate from their traditional base in China.
Due to favorable exchange rates, Japan and Australia saw increased external demand for manufacturing, but domestic demand remains weak.
Subdued manufacturing conditions led to modest rental increases in factory rents across Asia in Q1. The CBRE Asia Manufacturing Rental Index increased by 0.2 per cent quarter-on-quarter, the slowest rate of growth recorded since the start of 2013. The increase was driven by Guangzhou, Shanghai, and Shenzhen.
Uptick expected
Private consumption is forecast to improve in most Asia Pacific markets this year. China, Malaysia, and Indonesia are expected to expand, but at a slower pace than in 2014.
Consumption patterns in Viet Nam, India, and the Philippines are growing at a quicker pace in 2015 due to rising income levels. Viet Nam has attained consumption growth of 7.3 per cent, India 7.1 per cent, and the Philippines 6 per cent.
Figures from the US-based not-to-profit professional organisation for Project Management Institute (PMI) in March 2015 all show expansion, with external demand remaining healthy.
While there were reports of a slight fall in employment in Viet Nam in March, the sector had recorded steady growth in the previous six months.
India is still hesitant to increase capacity as employment levels have been flat for the past 14 months.
Darren Benson, executive director, industrial & logistics, brokerage services, CBRE Asia, said: "The industrial and logistics sector—in Asia specifically—continues to be driven by e-commerce firms and 3PLs, a trend that is driving demand for modern logistics developments and networks across the region.
"In particular, we see that e-commerce is having a changing effect on most markets, especially China, Japan, South Korea, and India.
