GuShiio.com Retail NPI for fiscal year 2024 increased by 1.9% year-on-year. The park business brought a certain drag: during the period, the NPI of its industrial parks was 333 million yuan, a year-on-year decrease of 8.90%; the NPI of logistics parks was 27.4 million yuan, a year-on-year decrease of 55.16%.
The latest performance of CapitaLand China Trust (CLCT) reveals the coolness of the park’s development.
The fund recently announced its 2024 fiscal year results. During the period, the fund achieved total income of 1.838 billion yuan, a year-on-year decrease of 3.9%; net property income of 1.2191 billion yuan, a year-on-year decrease of 5.8%; and dividend per share of 5.65 cents (SGD), a year-on-year decrease of 16.2%.
Fund retail performance was relatively strong during the actual period, but the non-inclusion of contributions from Capita Mall Qibao, which ceased operations in March 2023, and Capita Mall Shuangjing, which was sold in January 2024, as well as low contributions from business parks and logistics parks, led to a year-on-year decline in NPI.
As CLCT’s largest asset class, the retail portfolio increased by 1.9% year-on-year in fiscal year 2024. The park business brought a certain drag: during the period, the NPI of its industrial parks was 333 million yuan, a year-on-year decrease of 8.90%; the NPI of logistics parks was 27.4 million yuan, a year-on-year decrease of 55.16%.
Property rental pressure
CapitaLand China Trust (CLCT) is Singapore’s largest China real estate investment trust. It was listed on the Singapore Stock Exchange on December 8, 2006. It has long-term investments in diversified income properties and real estate-related assets in the mainland of China, Hong Kong and Macau, mainly for retail, office and industrial purposes (including business parks, logistics facilities, data centers and integrated development).
Currently, CLCT’s investment portfolio includes 9 shopping centers, 5 industrial park properties and 4 logistics park properties. The total construction area of the investment portfolio is approximately 1.8 million square meters, distributed in 12 major cities in China.
According to the announcement disclosed by CapitaLand China Trust, based on GRI, as of December 31, 2024, the proportions of CapitaLand China Trust’s Business Parks and Logistics Parks in the asset portfolio are: Business Parks: 25.8%; Logistics Parks: 3.5%.
The combined proportion of these two types of park asset categories is 29.3%.
CLCT’s five industrial park investment portfolio is located in the high-growth economic zone. The properties include Tengfei Xinsu, Singapore Tengfei Science and Technology City, Tengfei Innovation Center, Singapore Hangzhou Science and Technology Park Phase II in Singapore. The fund’s industrial park tenants include high-quality domestic and multinational companies operating in high-growth industries such as biomedicine, electronics, engineering, e-commerce, information and communications technology, and financial services.
Affected by increased market supply and intensified competition, the occupancy rate of CLCT Industrial Park will decline in 2024, with an average occupancy rate of 87.6%(91% in December 2023), a decrease of 3.4 percentage points from the end of 2023. The vacancy rate of the two industrial parks in Xi’an and Hangzhou exceeded 25%, and the overall rent level dropped by 4.5% during the period.
The sluggish occupancy rate and rental rate have led to a decline in revenue. In 2024, CLCT’s five industrial parks achieved revenue of 475 million yuan, a year-on-year decrease of 3.32%; net property income was 333 million yuan, a year-on-year decrease of 8.90%.
It is reported that due to the business contraction of a major tenant in the third quarter of 2024, the occupancy rate of Tengfei Kehui City in Singapore dropped from 90.1% in the fourth quarter of 2023 to 71.8%, a significant decrease of 18.3 percentage points year-on-year; The occupancy rates of the two projects in Hangzhou are 74.6% and 84.4% respectively, mainly facing challenges in the field of e-commerce.
However, Suzhou Xinsu Industrial Park still performed outstandingly, with an occupancy rate of 96.6%, much higher than the average occupancy rate of 68.5% in the Suzhou market.
Judging from the expiration of tenants ‘leases, the vast majority of tenants in CLCT Industrial Park have leases in 1-3 years, with 38.7% of tenants expiring in 2025, and 93.2% of tenants expiring within 3 years, facing certain leasing pressure.
Logistics Park AB
Logistics parks face similar situations to industrial parks. In 2021, CapitaLand China Trust acquired four high-quality logistics assets in Shanghai, Kunshan, Wuhan and Chengdu for 1.683 billion yuan, entering the China logistics market for the first time.
That was a period of high prosperity for domestic logistics parks.
Today, the declining logistics park market is reflected in CLCT’s performance: during the period, CLCT’s average occupancy rate of logistics parks reached a high level of 97.6%. In December 2023, the occupancy rate was 82%, a significant increase of 15.6 percentage points and better than 75% market average.
But this is the result of a rent reduction. In 2024, the fund’s logistics parks will significantly reduce rents in exchange for high occupancy rates, and the rental level of logistics parks will drop by as much as 24.5%.
Therefore, even if the occupancy rate has increased significantly, the NPI performance of the logistics park has also been affected to some extent due to the decline in market rent levels and the relocation of some assets.
During the period, CLCT’s four logistics parks achieved revenue of 48.8 million yuan, a year-on-year decrease of 42.38%; net property income was 27.4 million yuan, a year-on-year decrease of 55.16%. This was mainly due to the significant drop in rental levels, which led to a significant decrease in revenue, and the impact of the suspension and renovation of Shanghai’s logistics projects.
This is a common dilemma faced by the logistics market. In the downward market, tenants ‘pursuit of low rents has become a common phenomenon. Coupled with the increase in supply,”involution” is most directly reflected in rents.
Industry City Park commented that CLCT’s logistics park tenants cover multiple industries from logistics and warehousing, pharmaceuticals, manufacturing to e-commerce. The properties include Shanghai Fengxian Logistics Park in Shanghai, Kunshan Bacheng Logistics Park in Kunshan, Wuhan Yangluo Logistics Park in Wuhan and Chengdu Shuangliu Logistics Park in Chengdu.
Among them, Shanghai Fengxian Logistics Park successfully signed a contract as a third-party logistics main tenant in December 2024, with an 8-year lease, achieving a occupancy rate of 100%, a significant increase of 39.7 percentage points year-on-year; Kunshan Bacheng Logistics Park has an occupancy rate of 100%.; The occupancy rate of Wuhan Yangluo Logistics Park is 99.7%, which is close to full lease status.
The occupancy rate of Chengdu Shuangliu Logistics Park has also increased significantly, increasing from 67.8% in the fourth quarter of 2023 to 90.7%.
CLCT’s management said: “We have responded to the challenge in our logistics and business park portfolio and maintained solid occupancy rates that exceed or are at par with market levels. We successfully signed a main tenant for Shanghai Fengxian Logistics Park in December, increasing the occupancy rate of our logistics park to 97.6% on December 31, 2024.”
The fierce competition in the market is also reflected in asset valuation. According to disclosures, as of December 31, 2024, CLCT’s portfolio valuation fell by 1.7% year-on-year. Among them, the total valuation of the fund’s five industrial park properties reached 5.397 billion yuan, and the average unit area price was 7060 yuan/square meter. Except for the Tengfei Xinsu project, the valuation of other projects has declined, such as Xi’an Tengfei Kehui City in 2024. The valuation dropped by 2.5%, and the Tengfei Innovation Center dropped by 2.8%.
Similarly, affected by the imbalance between supply and demand, the total valuation of the fund’s four logistics park properties was 1.469 billion yuan, an overall reduction of nearly 10%, and the average unit area price was 5538 yuan/square meter. The valuations of the four projects have declined. Among them, the valuation of Shanghai Fengxian Logistics Park will drop by 14.7% in 2024, the valuation of Kunshan Bacheng Logistics Park will drop by 11.0%, the valuation of Wuhan Yangluo Logistics Park will drop by 7%, and the valuation of Chengdu Shuangliu Logistics Park will drop by 3.4%.
