The industrial landscape continues to evolve across Asia Pacific. The Chinese mainland has moved up the value chain to produce higher-order goods, such as photovoltaic panels, electric vehicles and batteries. At the same time manufacturers are expanding operations into India and Southeast Asia to capitalise on large, low-cost labour pools and good geographical connectivity.
Strong demand for space is driving landlord-friendly conditions across much of the region as occupiers compete for limited space. The issue is most acute in Australia, where national vacancy sits at just 2.0% and as tight as 1.3% in Sydney. Similarly, there are limited vacancies in Tokyo and Seoul, though all markets are expected to receive an injection of new supply over the next 1-2 years.
Economic headwinds in the Chinese mainland have dampened demand for space, which together with recent additions of new supply, especially in Tier 2 and Tier 3 cities, has pushed vacancy levels to 14% nationally.
Rent growth reflects these trends with the strongest growth seen in Australia and Vietnam. As new supply comes to market, rental growth pressures are expected to ease, though conditions are expected to remain landlord-favourable over the near term.
