BUSINESS Third-party logistics a standout sector amid robust economic recovery

BUSINESS

Third-party logistics a standout sector amid robust economic recovery

China Daily

10:16, May 07, 2021

Workers sort merchandise at GLP logistics zone in Harbin, Heilongjiang province, in March 2020. (Photo: Xinhua)

Even during the most difficult days when COVID-19 prevailed, demand for logistics has never withered, and the sector is now embracing a brighter outlook along with the recovery of the Chinese economy, experts said.

Driven by strong domestic consumption demand, China's third-party logistics market scale expanded to $331 billion last year, with a compound annual growth rate of 16.6 percent between 2013 and 2020. This has driven the rapid development of logistics warehouses, which play an important part in enhancing logistics efficiency and customer experience within the retail supply chain, said a white paper on China's logistics property market by JLL.

Given the robust consumption growth outlook, third-party logistics will continue with growth momentum and bring sustainable demand for logistics real estate, according to the paper published in April.

Steady development of third-party logistics, rapidly expanding e-commerce and solid retail and manufacturing industries have all contributed to thriving logistics properties, said Xiong Jianping, executive director of valuations for JLL China.

At the same time, thanks to regional economic integration, logistics property markets have developed several key hubs and satellite cities to meet demand overflow, according to the latest statistics.

In Beijing, the vacancy rate hit a two-year low in the first quarter, said CBRE.

In spite of tight availability, e-commerce and third-party logistics tenants related to fresh goods businesses are keen to expand within Beijing and are willing to pay higher rents for high delivery speed and quality. As the imbalance between supply and demand intensifies, rentals are being further pushed up.

In Shanghai, leasing transactions related to the logistics market were active in the first quarter with an overall net absorption of 37,000 square meters, while daily rents rose 0.8 percent quarter-on-quarter to 1.51 yuan ($0.23) per square meter, according to a Colliers report.

New demand from third-party logistics and fresh food e-commerce drove the overall vacancy rate down to 12.2 percent. Due to limited warehouse space in core areas of Shanghai, occupancy rates were nearly 100 percent at hot spots like Shanghai Pudong International Airport.

In the future, as Shanghai's logistics market matures, surrounding cities are expected to undertake spillover demand from Shanghai and bring the market to full maturity, said Yuan Xiaochao, head of research in East China with Colliers.

There will be a total of 161,000 sq m of new warehousing logistics supply becoming available in Beijing in the coming six months. This will adequately ease the supply shortage, and provide more dynamism to the market, stated the CBRE report.

Supportive measures for logistics facilities development and government planning on specialized logistics space would add more vitality to logistics real estate for the capital city in a broader scale, according to Li Hong, head of industrial & logistics with CBRE Northern China.

Looking ahead to the whole year, Colliers expects the net absorption in Shanghai to rise to 550,000 sq m, with rents to grow 3 percent year-on-year. "With continued expansion of e-commerce, the logistics market will maintain a healthy supply and demand balance," Yuan said.

The 14th Five-Year Plan (2021-25) has set a goal of establishing a modern logistics system, according to which the logistics industry is required to pay more attention to lowering costs and enhancing intelligent capability, according to experts.

"(Given all that) we can expect the Chinese logistics property market to welcome brand-new opportunities under the new development pattern," Xiong said.

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