Warehouse rents in Asia-Pacific hold steady on e-commerce demand: Knight Frank

Prime warehouse rents in Singapore declined only 0.6 per cent from the second half of 2019, said Knight Frank.
Prime warehouse rents in Singapore declined only 0.6 per cent from the second half of 2019, said Knight Frank.PHOTO: KNIGHT FRANK

SINGAPORE (THE BUSINESS TIMES) - The first half of 2020 largely turned out to be a "resilient" period for warehouse markets in the Asia-Pacific, and expectations are for this sector's rents in Singapore to remain stable till the rest of the year, according to research by property consultancy Knight Frank.

Prime warehouse rents in Singapore generally held steady in the first half of this year, declining only 0.6 per cent to $1.80 per sq ft per month from the second half of 2019, Knight Frank said.

This came despite economic activity grinding to a halt as a result of the April to June circuit breaker period and the economy entering a recession during the same time.

The performance was supported not only from increased appetite for space from the e-commerce sector, but also the production and storage of essential commodities such as medical and hygiene-related products, the report said.

With only 4 per cent of existing stock slated for completion over 2020 and 2021, as well as half already pre-committed, Knight Frank expects prime warehouse rents in Singapore to hold steady till the end of the year.

Mr Daniel Ding, head of capital markets for land and building, international real estate and industrial at Knight Frank Singapore, said: "It has become clear that the winner coming out of this health crisis is very much some specialist sub-sectors within the industrial asset class, including institutional-grade warehouses. We expect rents to stabilise and gradually trend upwards in the coming months."

With the exception of Hong Kong, market conditions for 16 of the 17 cities tracked are expected to remain stable or improve over the next 12 months, Knight Frank said.

With most of the region under some form of lockdown and with movement restrictions in place, a significant portion of consumption demand was diverted online as people were kept at home, the report noted.

Online consumption within the developed Asia-Pacific markets accounted for close to 20 per cent of all retail consumption in the first half of this year, versus just 15 per cent in the same period last year, with e-commerce demand helping to drive demand for warehousing, Knight Frank said.