Asia Pacific industrial demand lags as tenants wait

More than half of future industrial tenant demand in Asia Pacific is being driven by expansion plans, according to JLL. A gap, however, remains between tenant requirements and completed leasing activity.

JLL's latest regional study found warehousing accounts for about 80% of total future demand, underlining the continued importance of logistics property in occupier plans across the region. At the same time, manufacturing is gaining ground, especially in India and Southeast Asia, as companies reshape supply chains and add advanced production capacity.

The figures point to a market where occupiers still want more space but are moving more slowly on commitments. Persistent macroeconomic pressures, including geopolitical tensions and tariff uncertainty, have lengthened decision-making timelines and slowed conversion into realised absorption.

"We're observing a noticeable gap persists between active tenant requirements and realised absorption, reflecting the cautious 'wait-and-see' approach many occupiers are adopting amid economic uncertainty. However, while decision-making timelines have extended, underlying fundamentals remain supportive, with conversion rates expected to improve once macroeconomic clarity returns," said Elizabeth Low, Director, Research, Asia Pacific, JLL.

Demand mix

Third-party logistics and logistics and distribution remain the largest source of active tenant demand in the region, representing more than 30% of requirements in JLL's study. E-commerce follows at about 11%, reinforcing the role of online retail and related supply chains in shaping warehouse demand.

Low said Asia Pacific's scale in online retail continues to support that trend.

"The 3PL and eCommerce segments will remain key anchors of future industrial demand. This is supported by Asia Pacific's position as the world's largest eCommerce market, accounting for approximately 40% of global eCommerce revenue. The emphasis on online retailing is driving demand for fulfilment operations, distribution hubs and returns processing facilities, which will only accelerate," she said.

Leasing demand from these sectors remains steady in markets including Tokyo, Seoul, Sydney and Melbourne, reflecting the continued importance of established consumption centres and transport networks for occupiers seeking warehouse and distribution space.

Beyond logistics, the automotive sector is emerging as another contributor to industrial property demand. This is concentrated in India, China and Thailand, where vehicle manufacturing and related supply chains are creating requirements for production and component facilities.

India's automotive market is benefiting from government support and rising domestic consumption, the study found. In China, demand is being driven by the electric vehicle supply chain, including battery production and component assembly.

Market split

JLL described a clear divide between mature and emerging industrial markets in Asia Pacific. In Australia and New Zealand, Greater China and Japan, occupiers tend to favour larger sites, with relocations accounting for most future demand.

That suggests established tenants in those markets are focused on upgrading to larger, more modern logistics facilities rather than simply taking additional space. More than half of requirements in those mature markets exceed 10,000 square metres.

By contrast, India and Southeast Asia are leading in build-to-suit and purchase activity, together accounting for about three-quarters of those requirements.

Land availability, lower pricing and more flexible regulatory settings have made those markets more attractive for greenfield development. As a result, expansion-led demand is stronger as occupiers seek to position production and distribution networks closer to new supply chain hubs.

The findings also suggest regionalisation is becoming a more important factor in property decisions. Companies reviewing sourcing and manufacturing footprints are helping to lift industrial demand in markets that offer room for custom-built facilities and ownership structures not always available in more constrained locations.

JLL's study covers 13 markets across Asia Pacific and examines tenant behaviour, location priorities and sector demand. It shows an industrial market that remains active despite uncertainty, with occupiers still planning growth but taking longer to translate those plans into signed deals.

For landlords and developers, that may mean continued demand visibility without an immediate uplift in completed transactions. For tenants, it reflects a market in which long-term expansion and supply chain restructuring remain in play even as short-term caution shapes leasing decisions.