Nonetheless, transaction volumes fell more than 40% in the 12 months to the end of March and, with prices at record levels, yields are rising in markets where there is significant oversupply. However, rises are minimal, compared with the US, where rises of 150 basis points have been seen in some markets.

James Macdonald, Head of Research & Consultancy at Savills China, says: “The influx of capital into the China logistics market has pushed up asset prices to record highs in recent years, meanwhile, the recent covid experiences and a surge of new supply however have given investors reasons to re-evaluate current asset values, thus yields in some markets have started to rise.”

Inflation in China has stayed low – only 2% in 2022 – so there have been no interest rate rises of the sort which have upset logistics cap rates in major Western markets as well as Japan and South Korea. Nonetheless yield have been softer due to higher supply and are considered to have bottomed out at the end of last year.

The sector remains the investor’s favourite: 80% of China real estate private equity fundraising in 2022 was for industrial and logistics vehicles. Now domestic life insurers are increasing their allocations to real estate and industrial & logistics is one of their preferred sectors.

Macdonald says: “Domestic insurance companies are working with experienced logistics platforms to deploy capital more effectively, focusing on satellite cities for first-tier cities with strong infrastructure links.”

Furthermore, the China real estate investment market is providing new capital for industrial and logistics assets. Last year, GLP’s China REIT was the first such vehicle to acquire existing assets since the first C-REITs launched in 2021.

“More investors will likely see REIT listing as a possible exit for their portfolios as the appetite for stable rental income and quality products remains strong,” says Macdonald.

However, on the negative side, interest from overseas investors has dwindled somewhat; domestic investors made up 70% of buyers in the 12 months to end-March, up nine percentage points on the same period in 2022.

In the first tier cities of Beijing, Shanghai, Shenzhen and Guangzhou rents have been rising steadily but unremarkably and Savills is predicting more of the same for the next two years.

Tenant demand continues to be driven by e-commerce, with groceries and food delivery expected to increase demand for cold storage facilities. While global manufacturers continue to diversify their supply chains and political tensions persist, trade between China and the US hit a record high in 2022, suggesting little to fear for industrial and logistics demand.