Logistics demand was robust in Q4 2019, supported by the traditional peak season for online shopping and year-end holidays. Diversified industries underpinned demand for Class A warehouses during the period. E-commerce and 3PLs accounted for more than half of new leases signed in Q4 2019, while the automotive component, food & beverage, and electronic appliances sectors also turned more active, driving up net absorption by 54% q-o-q. However, on an annual basis, net absorption fell by 46% y-o-y to the lowest level since 2014.

 

New supply in the 16 cities tracked by CBRE reached a record high of 1.67 million sq. m. in Q4 2019. The period also saw a continued wave of relocations to self-owned warehouses by major e-commerce platforms. Under these circumstances, the overall vacancy rate increased from a historical low of 9% in 2018 to 12.6% by end-2019.

 

With the exception of Wuhan – the epicentre of the COVID-19 outbreak – new projects in most cities are on track to be completed in 2020, with delays of no more than one to two quarters expected. Therefore, CBRE expects new supply to continue to outpace net absorption in 2020. The virus outbreak could create headwinds for Class A warehouse demand in H1 2020. Broader consumption will probably suffer but will be cushioned by the rise of online retail and food delivery services.

 

CBRE expects overall demand to gradually recover as soon as COVID-19 outbreak has been brought under control. Nevertheless, with the outbreak now affecting other major economies including Continental Europe and North Asia, we are cautious about the export-related warehouse demand.

 

That said, we expect logistics demand for domestic consumption to recover earlier than the export-related demand. Demand from 3PL firms, new e-commerce platforms, and retailers (especially those in the fresh food and pharmaceutical sectors) is forecasted to increase steadily. In addition, several new growth engines such as B2B ecommerce platforms have recently emerged and will drive further demand in the year ahead.