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APAC Logistics Rents Fall for First Time Since 2020

2025-07-30

Logistics rents across the Asia-Pacific region declined 0.4% year-on-year in H1 2025, marking the first annual drop since 2020, according to Knight Frank’s Logistics Highlights H1 2025 report. Despite global trade tensions and cautious occupier sentiment, India emerged as a standout performer, driven by robust manufacturing momentum and supply chain recalibration.

Regional Trends and Divergence

While rents largely remained stable across most markets, regional differences became more pronounced:

Mainland China continued to see rental declines, though the pace of decline moderated to 12.8% YoY, supported by government stimulus.

Australia and Southeast Asia saw slower rental growth, while vacancy levels rose in some cities.

India posted the strongest rental growth in the region at 3.4% in H1 2025, up from 2.1% six months earlier, despite a rise in vacancies in its top three logistics hubs.

India’s Manufacturing Surge Spurs Growth

India’s Purchasing Managers’ Index (PMI) hit a 14-month high of 58.4 in June, signalling rising output, export demand, and record employment growth. This surge has driven logistics demand, with the manufacturing sector remaining the largest occupier group.

“India’s logistics sector continues to display strength and stability, driven by the manufacturing rebound, policy support, and sustained occupier interest,” said Shishir Baijal, CMD, Knight Frank India.

“The rental growth reflects occupier confidence and the country’s rising potential as a key logistics hub in Asia-Pacific.”

Australia’s Mixed Outlook

Brisbane led the region with over 5% rental growth, but vacancy rates have surpassed historical averages. Landlords are offering higher incentives to attract tenants amid oversupply, though a slowdown in new development post-2025 is expected to stabilise the market.

Shifting Strategies: Occupiers Reassess Portfolios

Many companies across Asia-Pacific are re-evaluating their logistics footprints to balance cost control with operational flexibility. The current market presents a strategic window to reposition assets, particularly near urban centres and multimodal transport corridors.

“Real estate portfolios are increasingly being reconfigured to support resilient, regionalised supply chains,” said Tim Armstrong, Global Head of Occupier Strategy, Knight Frank.

“We’re seeing clear shifts towards larger, more efficient hubs closer to consumption centres.”

China Shows Signs of Stabilisation

Mainland Chinese markets, particularly Beijing and Shanghai, are gradually recovering. While vacancy rates remain high at 27.3%, rental declines are expected to narrow as peak supply phases out by late 2025. However, Beijing still faces pressure with 2 million sq m of new space scheduled for delivery in H2 2025.

Looking Ahead

As front-loaded shipments and tariff-driven demand ease, the logistics sector may enter a recalibration phase in H2 2025. Evolving geopolitical risks, supply chain shifts, and policy changes will drive more nuanced occupier strategies across the region.

“India, with a competitive cost and tariff structure, is emerging as a key alternative in China-plus-one strategies,” said Christine Li, Head of Research, Asia-Pacific, Knight Frank.

Occupier focus is likely to remain selective, favouring India and emerging Southeast Asian markets for long-term growth potential.