China’s logistics market is taking off with great market potential. Rapid e-commerce development in China brings opportunities to logistics industry in recent years. B2C online platforms like JingDong and Alibaba have been investing in setting up their own logistics centres while other service providers also require warehouses and delivery centres for operation. A constant expansion of express railway and highway transport networks on the mainland facilitates domestic logistics process and boosts China’s logistics and other related markets.
Currently the number of Grade-A warehouses in China only accounts for less than 20% of the total amount. Most mainland warehouses are not yet equipped with modern logistic facilities. There is huge demand for high- quality warehouses on the mainland. Unlike the residential property market, Chinese government has not yet imposed any regulative policies on logistics property market investment, leading to high potential for both price and rental growth. By May 2014, the average rent of high-end warehouses in China has increased for 18 consecutive seasons. Attracted by the high yield, the total investment amount in warehouses and distribution centre in 2014 rose 38.8% y-o-y to RMB 3.2 billion. One of the largest property developers in China also decided to step into the logistics property market with the establishment of a logistics realty firm. The new firm will mainly be developing two projects at its early stages. They are located in Guizhou and Wuhan respectively. Guizhou project is a logistics centre for express delivery, covering a total site area of about 133,000 square meters, while Wuhan one covers a total site area of about 149,000 square meters. It shows the developers in China are optimistic towards the future development of logistics property market.
Apart from its promising prospect, there are also various concerns regarding the logistics property market on the mainland. Access to land remains the biggest problem, as warehouses for storage usage are not able to generate great employment opportunities and tax revenue, local governments are reluctant to allocate land to the logistics industry. The long investment cycle of logistics industry also poses greater risk as a large amount of fund is required for land purchase at early stages. Despite these potential risks, logistics property development is still expected to draw significant attention in the future, given its relative strong demand and yield