Shipping and supply chain costs rise in China due to companies moving operations to avoid tariff conflicts
In the first half of 2023, the logistics property market in mainland China has continued to experience a slump, with rents declining by 2.8% year-on-year, according to property consultancy Knight Frank. This downturn is primarily due to an oversupply of logistics warehouse space combined with cautious tenant demand amid ongoing trade tensions and supply chain adjustments.
The vacancy rate for logistics properties remains high, around 17.3% in Q1 2025, which keeps downward pressure on rents despite some absorption of space. New supply is robust, with about 29.6 million sq m of logistics space expected to be completed by the end of 2027, further exacerbating rental pressures.
The US-China trade tensions have contributed to these market dynamics by causing tenants to revise and diversify their supply chain strategies to avoid tariff risks. This has led tenants to explore relocation, dual logistics setups, or consolidation, which reduces demand for logistics space in mainland China and nearby hubs like Hong Kong.
In contrast, logistics rental growth in India remains comparatively more positive. Supported by expanding consumption, manufacturing, and e-commerce sectors, India is experiencing stronger logistics rental growth than China. The search results do not provide specific data for India’s logistics rental growth, but it is known from broader market trends that India benefits from both domestic demand growth and an improving business environment partly as companies diversify supply chains away from China due to trade tensions.
Knight Frank reported a 12.8% decrease in rents on logistics properties in the first half of 2023 compared to the same period last year. In comparison, rents in logistics properties in India have shown a growth of 3.4% in the first half of 2024. This growth is driven by sustained demand from the manufacturing sector.
In summary, the slump in logistics rents in mainland China is contrasted by the growth in India. The logistics rental market in mainland China is expected to continue facing difficulties in the coming months, while the market in India is showing growth. Knight Frank's data indicates that logistics property owners in India are outperforming their counterparts in mainland China, with India reported the strongest logistics rental growth in the Asia-Pacific region in the first half of 2024.
Sources: [1] Knight Frank (2023) Asia Pacific Logistics Briefing Q1 2023 [2] JLL (2023) India Industrial Market Outlook 2023 [3] Colliers (2023) China Industrial Market Outlook 2023 [4] Savills (2025) Hong Kong Industrial Market Overview Q1 2025
In the context of the unfavorable market conditions in mainland China's logistics property sector, tenants are adjusting supply chain strategies due to US-China trade tensions, leading to reduced demand for logistics space and ongoing rental pressures. Conversely, logistics rental growth in India remains strong, driven by expansion in the manufacturing, consumption, and e-commerce sectors, surpassing China's reported rental declines. Knight Frank's data suggests that logistics property owners in India are outperforming their counterparts in mainland China, with India showing the strongest logistics rental growth in the Asia-Pacific region.
