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ASIA-PACIFIC LOGISTICS RENTS DIP IN H1, FIRST ANNUAL DECLINE SINCE 2020
July 23, 2025
Logistics rents across Asia-Pacific held nearly flat in the first half of 2025, dropping just 0.4% year-on-year despite global trade tensions and heightened caution among occupiers, according to Knight Frank's Logistics Highlights H1 2025 report.
The independent global property consultancy firm said this represents the first year-on-year drop since 2020, when the pandemic triggered a surge in demand for logistics spaces.
Knight Frank said that although 13 of 17 tracked cities recorded stable or increasing rents year on year in H1 2025, the report unveils signs of divergence, citing continued rental declines across Chinese mainland markets and a marked slowdown in rental growth in Australia and Southeast Asia.
Most other regional markets registered modest gains, keeping the broader rent index in stable territory.
India, on the other hand, posted the "strongest growth" in the Asia-Pacific logistics sector. Knight Frank stated that the country's manufacturing sector reached a 14-month high, with its S&P Purchasing Managers' Index rising to 58.4 in June, the strongest performance across the region — driven by rising international sales, higher output, and record-breaking employment growth.
Despite a rise in vacancies across India's three largest logistics markets, rents climbed at a faster 3.4% in H1 2025, up from 2.1% six months ago.
Knight Frank stated that this outperformance was driven by sustained demand from the manufacturing sector, which remained the most prolific occupier group and continued to anchor the market.
Brisbane led all regional markets in rental growth, with rates climbing by more than 5% annual rental growth in H1 2025.
[Source: Knight Frank]
"Much of the region's stability in H1 2025 may also reflect strategic front-loading of shipments ahead of tariff deadlines, raising questions about occupier demand in the coming months," the independent global property consultancy firm said.
It added that companies are now reassessing costs and operational flexibilities to optimise their logistics portfolios.
"As firms weigh their strategic priorities, real estate portfolios are increasingly being reconfigured to support more resilient, regionalised supply chains. This includes investment in distribution hubs, proximity to ports or multimodal transit networks, and the integration of logistics infrastructure with office and support functions," Tim Armstrong, global head of occupier strategy and solutions, Knight Frank, said.
He noted that occupiers are likely to focus more resources towards establishing bigger and more efficient logistics hubs close to urban areas while right-sizing those in less strategic locations.
"This trend is already evident in Australia, where occupier demand has gravitated towards prime areas, such as Brisbane's Trade Coast. As rental growth in the region continues to moderate, the current window represents an opportunity for occupiers to strategically position their portfolio for long-term growth," Armstrong added.
Chinese mainland stabilizing, India on the rise
Meanwhile, Knight Frank said Chinese mainland markets, which have been under pressure, showed encouraging signs of recovery.
Rental declines moderated significantly to 12.8% year-on-year from 14.1% in H2 2024, supported by government stimulus measures that boosted demand for digital devices and logistics services.
Total stock in Beijing and Shanghai reached approximately 20 million square meters, though vacancy rates climbed to 27.3%. In Hong Kong SAR, it noted that "a healthy supply pipeline through 2027 is expected to keep rents under pressure, even as leasing velocity remains subdued."
Looking ahead, Knight Frank signalled a "cautious" outlook for H2 2025. It said that Shanghai is expected to see narrowing rental declines in late 2025 as supply peaks pass, though Beijing faces continued pressure with an additional 2 million square meters scheduled for delivery in the second half of 2025.
In the next 12 months, it expects a decreasing rental outlook in Beijing, Hong Kong SAR, and Shanghai. It sees a steady rental outlook in Auckland, Bengaluru, Delhi-NCR, Mumbai, Bangkok, Greater Kuala Lumpur, Manila, Greater Jakarta, Singapore, and Sydney.
Knight Frank expects logistics rental to increase in Brisbane, Vietnam SKER, Melbourne, and Taipei.
Chistine Li, head of research, Asia-Pacific, Knight Frank, noted that while rents have continued to dip in Chinese mainland markets, further deceleration across the rest of the region has dragged rental growth into negative territory.
"We believe this to be largely due to occupier caution, as there has not been a significant deterioration in the region's fundamentals."
"As occupiers explore relocations or dual logistic strategies to mitigate cross-border tariff risks, India, with a more competitive tariff structure as well as lower costs, is emerging as an important node in China-plus-n strategies."
Li added that occupiers in the region can be expected to remain agile in adapting and evolving their supply chain strategies to weather the shifting geopolitical landscape. "While expansion plans will be put on hold, we expect selective demand to remain sustained in emerging Southeast Asian markets and India," she said.
Region to see recalibration of demand
Knight Frank said on its Logistics Highlights H1 2025 report that although conditions in logistics occupational markets in the region have remained stable so far, part of this stability may be attributed to the frontloading of shipments ahead of tariff deadlines, as occupiers strategically advance inventory to avoid additional costs.
"As the effects of these pre-emptive moves taper off, the region is likely to see a period of recalibration."
"The increasingly complex dynamics, ranging from shifting supply chains and evolving geopolitical tensions to fluctuating trade policies, will continue to weigh on occupier activity in the latter half of the year," Knight Frank added.
