The economy sours in China

Logistics hubs that were built in anticipation of a long-lasting boom are losing tenants.

- Bloomberg

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.

Logistics hubs built in anticipation of a long-lasting boom in e-commerce, manufacturing and food storage are losing tenants, forcing building owners to slash rents and shorten lease terms.

Shares of real estate investment trusts that own China commercial properties have plummeted, and some of their managers expect rental income to fall further.

Average vacancy rates at logistics properties in east and north China are approaching 20%, the highest in years, according to real estate consultancies. More warehouses are being built, which is making the problem worse.

"We are looking at a supply glut in logistics and industrial properties in China," said Xavier Lee, an equity analyst at Morningstar who covers the real estate sector.

The deterioration is disappointing for property owners that were counting on an economic rebound in China this year.