GLP suddenly slashes China development targets due to leasing market weakness

Targets have been pushed back by almost a year.

Global Logistics Properties has suddenly cur its development targets in China for FY16, a report by Barclays revealed.

The report said that targets are being pushed back by 9-12 months to preserve rent and occupancy growth after GLP suffered some tenant leasing weakness in June.

"After witnessing some tenant move-outs in June, management cut the targets for development starts and completions in China in FY16 by 23% and 21% to US$1.7bn and US$1.1bn, respectively. The US$1.7bn development starts implies a 5% y/y development start growth, disappointing compared with previous guidance of 31%," Barclays noted.

“While GLP has seen minimal move-outs in July and continued strong leasing in July, management decided to trim FY16E development starts and completions targets for prudence and not compromise on future rent growth and occupancy. Lease ratio was down 3ppt to 88%, partly due to newer properties being added into ‘stabilised properties’ every quarter by definition. As GLP has seen strong leasing in July, management expects lease ratio to recover to 90% in FY16,” the report added.