Oxstones Investment Club™By Michael Cole, From Mingtiandi site,
As China’s ecommerce sector continues to grow at a rapid pace it is creating demand for warehouse space that continues to outstrip supply, according to a new market report by DTZ China.
The shortage of warehouse space is a trend that has been noted for the past few years, however, DTZ’s China Insight report, which was released last week attempts to detail the future prospects for growth and point out potential opportunities for investors.
According to the report,
“The combination of limited supply of modern facilities and the ongoing growth of e-commerce in China presents global logistics providers with solid underlying fundamentals to support long term investment in the China market.”
In terms of location, the consultancy advised investors to focus on central and western China.
“With a growing online consumer base in central and western provinces, we see increased demand for warehousing supply in these areas as e-commerce players tap into demand. Ongoing government investment in infrastructure will help improve accessibility.”
In addition to the opportunities out west, DTZ also advised investors to look at secondary locations outside of Tier I markets, where rising land prices have driven up rents.
“We are seeing this trend in the important YRD region, where large e-commerce players such as Amazon China and Dangdang have chosen to locate their large scale warehouses in lower cost regional centres such as Kunshan and Wuxi as opposed to Shanghai. From here, they can still service Shanghai and the rest of the YRD region, aided to some extent by the so-called one-hour economic circle provided by the high-speed rail system.”
“These Tier II markets are receiving strong government support and incentives which help compensate for falling investment yields,” it added.
Investors should also put their money on established or well-connected players as they are better able to acquire suitable land for development of warehouses.
The report also identified a rising demand for smaller logistics facilities near urban centres, which would allow ecommerce firms to ensure efficient delivery to their city-dweller customers.
“These warehouses need to be in close proximity to a skilled labour pool and sited in locations that enable fast delivery, whilst also saving on costs — both shipping and operational. Such warehouses have large potential to grow in the future.”
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