Tier One Cities and Chengdu are Top Investment Destinations
Hong Kong, October 20,
2015 –Modern logistics is becoming
increasingly important as China’s overall logistics market evolves. CBRE announces
the publication of a new report - MarketScore: The
Key to Investing in the China Logistics Market.
The report provides an overview of the performance of the logistics property
market across 17 major cities in China and discusses the investment
opportunities in these markets.
past decade saw the birth and rapid development of the logistics industry.
However, the supply of logistics property continues to lag behind the rise in
demand. As of H1 2015, the total stock of modern logistics facilities of nine
major logistics operators in China was only 20 million sq. m. (0.015 sq. m. per
Chen, Executive Director, Head of
CBRE Research, China commented: ”Tier one cities, (especially
Shanghai) and Chengdu, are the top performing markets and the most attractive
destinations for investment. In terms of logistics property development, GLP
dominates the arena and has significantly shaped the logistics property
landscape in China over the past decade. However, in China where
funding options are very limited, newcomers might face an uphill battle in
competing with more established players.”
Louisa Luo, Senior
Director, Industrial & Logistics Properties, CBRE China, commented: “Given the market demand is large, the
logistics sector continues to be a hotspot for investors to deploy their
capital. In recent months, investors have continued to seek out opportunities
to engage in platform-level deals and joint ventures. We observed several such
cases during H1 2015: GAW Capital Partners established a joint venture with
logistics developer Vailog for the development, acquisition and management of
modern warehouses in China. Vanke also announced the creation of a logistics
subsidiary in conjunction with Blackstone while GLP established a logistics
fund of US$7 billion in July 2015. We believe, driven by the major investors
from both home and abroad, the logistics market in China will accelerate and
embrace unprecedented opportunities for growth.”
Shanghai – A Liquid
Currently China is shifting towards a more
consumption-driven economy and the country is also aggressively upgrading its
manufacturing industry. Market activity in Shanghai shows strong demand for
modern logistics facilities. As of Q2 2015, total logistics stock reached 3.75
million sq. m. with a vacancy rate of 9.1%. Regarding market demand, the
sources of demand for prime facilities are becoming increasingly diverse. Logistics
facilities’ rents have risen steadily over the past five years with CAGR of
5.8%. The Shanghai market is also the most active trading market for logistics
property transactions in China.
In H2 2015, modern warehouses of over 800,000 sq.
m. are expected to be completed. In consideration of the present low rate of vacancy,
the arrival of new supply could boost market activity accordingly and in the
meantime competition will be more intense and developers will be more willing
to offer preferential treatment for tenants.
Tier One Cities Outside
of Shanghai: Demand is Shifting Towards Nearby Cities
A strong economy and comprehensive layout of
infrastructure facilities provide a solid foundation for the logistics sector
in Beijing. Supported by a large consumer base (population of 20 million) and a
well-developed tertiary industry, market demand is driven by FMCG and e-tailing
firms. Logistics demand has soared in Guangzhou and Shenzhen in the Pearl River
Delta Area – a manufacturing hub – due in large part to demand from the
manufacturing industry. A large population base in the region has also
contributed to demand from e-commerce and 3PLs firms.
The tightening supply has compelled developers to
turn to neighboring cities that offer a wider range of attractively-priced
investment options. Investors and developers have expanded their footprints
through acquiring second-hand properties and land. Moving forward, CBRE expects
three major trends for cities like Beijing, Guangzhou and Shenzhen – 1)
optimization and upgrade of logistics warehouse facilities; 2) a buoyant market
for tenants in cross-border e-commerce; 3) increased ability of neighboring
cities to absorb pressure on existing land supplies.
logistics hub in West China
Benefiting from China’s strategic move to develop
western regions, Chengdu has achieved exceptional economic growth over the past
decade. The city currently serves the fourth largest aviation center in China
and also has an express highway that connects Asia to Europe, making it the most
important logistics hub for Sichuan province. As of H1 2015, qualified
warehouses in Chengdu recorded 1.2 million sq. m., with an overall vacancy rate
of 17.2%. Tenants from retail, e-commerce, 3PL, automobile & components
manufacturing industries will be key players. The aggregation of various
industries, the development of infrastructure, the construction of
international logistics channels and the planning of cross-regional networks
will work together to boost demand for logistics facilities in Chengdu,
ensuring strong and sustainable growth for the market in the near future.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
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