A $100 billion bet on China’s economy sours as warehouses and industrial buildings empty

In many parts of China, the warehouses and industrial parks that used to be a magnet for international investors are grappling with a surprising slowdown in business activity.

A few institutions are contemplating divestments of their worst performing assets before rents fall further. Others intend to wait out the downturn and expect to make money in the long run. The softening in the logistics and industrial sectors is happening alongside an office property slump that is playing out in major cities including Beijing and Shanghai. Both slumps also partly the result of overbuilding that was powered by the large sums of money that poured into commercial real estate when interest rates, borrowing and construction costs were low.

Of the 20 major Chinese cities that Cushman tracks, 13 saw logistics rents drop in the first quarter from the preceding three months, led by Beijing and Shenzhen, with falls of 4.2 percent and 3.9 percent respectively. An additional 33 million square meters—equivalent to around 4,600 soccer pitches—of new supply is scheduled for completion by end 2026 in the country, the consultancy said.

Lonza Group AG, a Swiss health-care manufacturing company, said earlier this year that it will close a drug manufacturing facility following a strategic review. The 17,000 square meter factory started production just three years ago in the China-Singapore Guangzhou Knowledge City, a high-tech business park jointly backed by the city’s local government and CapitaLand, owned by Temasek Holdings Pte.

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