Industrial property rents are expected to rise by another 3% to 5% this year
Filipinos’ fondness for online shopping is set to further boost Manila’s logistics property rents this year after surging nearly 40% in 2023, catapulting the Philippines’ capital over Sydney as the best-performing city in Asia-Pacific for this category, according to Knight Frank. Industrial property rents are expected to rise by another 3% to 5% this year, according to a report by the real estate consultancy.
“The surge in the number of online merchants in the Philippines has significantly increased the demand for logistics space in Manila,” said Christine Li, head of research for Asia-Pacific at Knight Frank.
The Australian cities of Sydney and Brisbane rounded off the top three cities in Asia-Pacific, with year-on-year rents for industrial space gaining 16.7% and 15.3%, respectively, in 2023, according to the study, which tracked 17 cities in the region. Hong Kong ranked fourth in this category with year-on-year rental growth of 9%. In the second half of 2023, the city had the second-best rental growth at 4.7%. This year, cities on Australia’s eastern seaboard are likely to register rental increases of more than 5%, Li said.
Online retail in the Philippines has grown five times since 2019, making it the fastest growing market in Southeast Asia, according to data cited by Knight Frank. E-commerce sales in the Philippines are forecast to hit US$19 billion in 2026, growing at a compound annual rate of 17.9% from 2022, according to local media reports, citing research from data and analytics provider GlobalData.
The growth in online retail sales is supported by the nation’s 5.6% economic expansion last year, making it Southeast Asia’s fastest-growing economy. The rental growth of logistics property in Manila helped lift the entire segment in Asia-Pacific, according to Knight Frank. “Overall rents in Asia-Pacific maintained their upwards trajectory to grow by an average of 6.2% year on year in the second half of 2023,” the report said. “However, near-term momentum indicated by half-yearly rental growth slowed to 1.5%, compared with 4.6% six months ago.”
Strong pre-commitments in Pacific markets are keeping vacancies tight, while Southeast Asia and India will continue to benefit from supply chain diversification. In contrast, mainland China will likely require some time to absorb a substantial pipeline given the sluggish economy.
Christine Li, Head of Research for Asia-Pacific at Knight Frank
The rental growth for industrial space, however, could not be replicated in mainland China. Shanghai and Beijing ranked at the bottom of the rankings, with rents retreating 5.9% and 2.8%, respectively, last year. “Rents in Beijing and Shanghai softened, pressured by the abundant supply of warehouses and weakening trade,” the Knight Frank report said. “Highly favourable rental rates in surrounding cities are also attracting tenants away from Shanghai and Beijing which further reduced demand.”
Only two other locations in the region saw rents decline last year – 0.1% in greater Jakarta and 0.6% in Bangkok. On the outlook for logistics property rents this year, Li said there will be considerable supply because of an ample development pipeline and availability of sublease opportunities. As a result, the impact on rents will be uneven across the region, she added.
