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Asia Pacific Real Estate Market Outlook 2020

Hear from our experts


Logistics market fundamentals appear solid. The World Bank4 anticipates 1.9% y-o-y growth in global trade volume in 2020, a moderate rebound from 2019’s 1.1% y-o-y. Regional private consumption growth is expected to be stable. Online retail sales growth will remain strong but the pace of expansion is slowing, with emerging consumer markets including India and Southeast Asia set to perform well on the back of steady urbanisation and demographic growth.

Although the shift towards omnichannel retail will drive steady leasing demand from retailers and third-party logistics firms (3PLs), CBRE expects the latter group of occupiers to turn more cautious towards extending their footprint due to tightening profit margins. Elsewhere, export-related manufacturers and trading companies will stay quiet amid continued geopolitical tension between the U.S. and China, despite the signing of the trade deal in January.

CBRE expects Asia Pacific logistics occupiers to be cautiously optimistic in 2020. Tenants will continue to place a strong emphasis on location, which will remain key to minimising delivery times and transportation costs. Modern logistics facilities with good connectivity to major transportation infrastructure and near large customer bases will remain popular. Renewal rather than expansion will be the primary focus in mature markets and lease negotiations are likely to be prolonged. Leasing demand in India, which has seen solid occupier expansion and consolidation since the implementation of the Goods & Services Tax (GST), will remain upbeat as more new investment grade supply is completed.

Competition for prime industrial and logistics space remains intense, with CBRE tracking growing interest from occupiers along different stages of the e-commerce supply chain. Recent years have seen robust demand from cold storage operators, particularly in Mainland China, Hong Kong SAR and Korea, supported by solid domestic consumption growth and the shift towards omnichannel retailing. The rapid growth in online grocery orders is also fueling demand for last mile logistics facilities such as dark stores, which are usually located in industrial space. Elsewhere, selected retailers are assessing the feasibility of converting obsolete retail properties into distribution centres or to serve-in-store fulfillment. Other new sources of demand include central kitchens, supported by the increasing popularity of dining out and on-demand food delivery.

Bonded warehouses – which enable dutiable goods to be stored or manipulated without payment of duty – are increasingly popular amid rising consumer demand for imported products. Total cross-border e-commerce sales in Asia Pacific are expected to grow from US$181.4 billion in 2018 to US$389.5 billion in 2023F5. Bonded warehouses will benefit from this trend as they facilitate faster delivery compared to direct shipping from the country of origin. CBRE expects to see a rise in leasing demand for this property class, especially in large consumer markets such as China and India, and particularly in cities with major ports and airports, such as Hangzhou, Shenzhen, Shanghai, Mumbai and Chennai.

Global Economic Prospects, The World Bank, January 2020.
Forrester Analytics: Online Cross-Border Retail Forecast, 2018 To 2023 (Global), April 2019.


Modern logistics supply remains limited. With the exception of Guangzhou, Singapore and Shanghai, vacancy rates in Asian gateway markets stood below 5% as of Q4 2019. However, tier II markets in China have high availability, with vacancy reported at 15.7% at year-end.

New logistics supply in Asia Pacific gateway cities in 2020 is projected to total 76 million sq. ft., with a further 52 million sq. ft. due for completion in Chinese tier II cities. Although most cities will continue to favour landlords, tenants will gradually enjoy stronger bargaining power.

Vacancy pressure is expected to mount in Greater China over the course of the year. Demand has weakened alongside slower economic growth, a situation further exacerbated by the relocation of major e-commerce tenants from leased buildings to self-developed facilities. While the situation in tier I cities is relatively stable on the back of limited new supply, tier II markets such as Dalian, Shenyang, Chongqing, Chengdu and Wuhan will struggle with rising vacancy.

Vacancy in Hong Kong SAR edged up to 2.1% at year-end as occupiers turned more cautious amid the uncertain economic outlook. While several tenants may surrender space in the first few months of 2020 and landlords are likely to adopt a less aggressive stance towards rental negotiations, vacancy will remain low.

The bulk of the new development pipeline for 2020 is in Greater Tokyo and Greater Seoul. The former enjoyed strong pre-leasing activity in 2019, reporting record-high net absorption of 25 million sq. ft. In the latter, pre-leasing momentum slowed over the course of 2019 and was insufficient to fill new supply, most of which comprised large size properties. The situation will remain challenging in the coming years, with the development pipeline set to rise to 20 million sq. ft. in 2020 and a similar figure due in 2021.



Regional rental growth in 2019 was below forecasts due to the impact of the U.S.-China trade conflict and weaker-than-expected economic growth. Perth was the main laggard, with rents falling by 9.5% y-o-y amid deteriorating engineering sector investment and a construction industry slowdown. The recent announcements of major resource projects are likely to boost leasing activity over the course of 2020, but rental growth prospects will remain limited.

2020 is expected to see milder rental growth as logistics occupiers remain cautious towards expansion, while landlords turn more flexible and offer higher incentives. Rental growth in Japan will moderate after a strong year, with landlords refraining from aggressive rental increases in view of the ample pipeline in 2021. Greater Seoul has limited room for rental growth as older facilities offer more rent free periods and lower rents in anticipation of new supply. Rental growth in China tier I cities will maintain its current momentum but forecasts for Hong Kong SAR have been revised downwards as occupiers turn more cautious amid local sociopolitical unrest.




E-commerce will continue to be the main tailwind propelling the logistics sector in 2020. Additional warehousing space will be required to meet the surge in last mile delivery as well as the structural shift towards omnichannel retailing.

The rise of online retail has raised supply chain costs, particularly those associated with last mile delivery and return of goods. Elsewhere, the profitability of 3PLs is being squeezed by rising labour and upgrading costs. Major e-commerce platforms also pose a threat to logistics service providers, with more companies now operating their own parcel and express operations. This will require logistics companies to conduct strategic reviews of their real estate operations.



Rapid growth in e-commerce related parcel volume; demand for quicker and more accurate delivery; and rising costs require logistics providers to create more efficient distribution systems. Many occupiers have already begun introducing automation technology into their logistics facilities, a trend that will continue. Major e-commerce platforms will also enhance their own delivery capability by constructing their own facilities.

Growth in Asia Pacific industrial land prices, especially in densely populated cities, has accelerated in recent years. Competition will remain stiff as data centre operators expand aggressively and local authorities look to attract high-tech manufacturers. This will prompt more logistics developers to maximise land use efficiency by constructing multi-storey warehouses.


Although overall conditions will remain in favour of landlords, tenants can expect to command stronger negotiation power as owners look to shore up occupancy. Landlords are advised to enhance their service offering to retain tenants and develop new income streams such as pre-quality checks, customs clearance support and procurement solutions. They should also be more proactive in implementing new technology such as sensors and building information systems into their facilities.

As in the office and retail sector, CBRE believes logistics landlords must transcend the traditional role of space provider and work more closely with tenants to help them achieve their business objectives. In particular, next-generation facility design must consider Corporate Social Responsibility (CSR) requirements by incorporating environmentally friendly features and providing high quality working conditions.


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Manish Kashyap
Global President, Advisory & Transaction Services
Advisory & Transaction Services
+65 6326 1220
+65 6225 1987
Dr. Henry Chin
Global Head of Investor Thought Leadership
& Head of Research, APAC
+852 2820 8160
+852 2810 0830
Cynthia Chan
Asia Pacific
+852 2820 2839
+852 2810 0830
Liz Hung
Asia Pacific
+852 2820 6557
+852 2810 0830