“Beijing logistics demand circle” widens

Due to increasing rental sensitivity of tenants, the “demand circle” of Beijing’s logistics market is widening.

July 02, 2024

Years of under-supply situation in Beijing’s logistics property market has shifted leasing demand into neighbouring cities, leading to the formation of a demand circle with Beijing at its centre. In our opinion, the development of the “Beijing logistics demand circle” can be divided into three stages:

  • First stage: Neighbouring areas began taking spillover demand from Beijing, forming the “Beijing demand circle”. Furthermore, due to supply constraints in Beijing, leasing demand gradually spilt over to logistics space in Wuqing District in Tianjin, and Guangyang and Anci Districts in Langfang.

  • Second stage: Policy factors during the COVID-19 pandemic led to the contraction of the “Beijing logistics demand circle”; transportation access in the Beijing-Tianjin-Hebei region was partially restricted, and tenant mobility was significantly reduced.

  • Third stage: The expansion of the “Beijing logistics demand circle” accelerated due to cost reductions and efficiency improvements. Following the relaxation of China’s COVID-19 restrictions, Langfang and Tianjin continued to attract tenants from Beijing due to their significant price advantages.

Since 2012, Beijing companies have gradually relocated to the more cost-effective Tianjin logistics market. This shift was led by increased supply in Tianjin and the need for warehouse expansion driven by business growth. Tianjin’s Wuqing sub-market, which has the advantage of being close to Beijing, has attracted most leading e-commerce companies from Beijing, such as Amazon, Alibaba, and JD. It has thus become the Tianjin sub-market with the highest rental price and the lowest vacancy rates. Guangyang and Anci areas have subsequently adopted Wuqing's development model, expanding their market volume and service scale to actively absorb Beijing’s spillover demand. With Beijing at its core, the “Beijing demand circle” drives the joint development of Wuqing, Guangyang and Anci.

In 2020, transportation between the Beijing-Tianjin-Hebei region was restricted due to COVID-19. The logistics markets in Tianjin and Langfang could not continue accommodating Beijing's overflow demand on a large scale. This resulted in significantly reduced tenant mobility and a severely contracted demand radius. When China’s COVID-19 restrictions were relaxed at the end of 2022, everyday transportation between the Beijing-Tianjin-Hebei region was able to resume, which laid the foundation for the recovery of the "Beijing logistics demand circle".

Since 2023, demand for cost-effective logistics space in Beijing has become increasingly prominent. Moreover, coupled with significant rental reductions in Langfang and Tianjin, the ongoing outflow of logistic demand from Beijing has slowed. According to JLL research data, in 2023, demand spilling over from Beijing to the Tianjin-Hebei region exceeded 200,000 sqm. With increasing demand flow within the Beijing-Tianjin-Hebei urban cluster, the "Beijing logistics demand circle" has returned to its pre-pandemic scope and is expanding to enter its third stage of development.

Demand in Beijing's logistics market has remained steady since the start of this year. However, the ongoing supply peak will impact the project pricing and leasing strategies of landlords. As market capacity expands, price differences within the "Beijing logistics demand circle" will accelerate the movement of market demand across Beijing, Wuqing and Langfang.

Figure 1: Beijing Logistic Demand Circle Supply (2014-2026)

Source: JLL Research, 2024