E-commerce platforms, third-party logistics firms and electric vehicle manufacturers displayed strong demand for logistics space in Q1 2019. NIO leased new warehouse space in Beijing and Shanghai while mallcai.com, B&Q and Tuhu.cn. committed to new leases in Nanjing, Shanghai and Tianjin, respectively.


Large e-commerce tenants surrendering space ahead of relocations to self-owned facilities continued to impact the high-standard warehouse market in major cities. Several withdrawal cases were recorded in Chongqing, Chengdu, Wuhan and Tianjin. This trend was especially visible in Chengdu, where the departure of several e-commerce platforms from the leasing market pushed up the vacancy rate for high standard warehouses by 5% q-o-q.


Around 830,000 sq. m. of new high-standard warehouse space was completed in Q1 2019, mainly in Beijing, Tianjin, Hangzhou and Chengdu. Overall vacancy in tier I cities was flat at 6.8%, but rose by 2.2 pps to 12.4% in tier II cities.


Developers turned more cautious towards asking rents amid the ongoing exodus of e-commerce tenants. Rental growth in tier I cities and major logistics hubs such as Suzhou and Tianjin ranged from 0.8% to 2.6%, a slower rate compared to 2018, while rents in Chengdu and Chongqing reported slight declines.


New high-standard warehouse supply over the remainder of 2019 is forecast to be around 3.6 million sq. m.. Several cities including Chongqing, Chengdu and Ningbo will see a supply peak this year. In addition to large new supply, other challenges facing logistics markets include the impact of the recent sharp decline in online retail sales on logistics demand, which could emerge in the coming quarters.