CHINA LOGISTICS MARKET
Macro Fundamentals
GDP GROWTH IS EXPECTED TO SLOW China Average Annual GDP Growth ( %) 12
10
8
6
4
2
0
2000-2004
2005-2009
2010-2014
2015-2020
Source: NBS China / Oxford Economics
2
CBRE CHINA RESEARCH
ANNUAL 6.9% Y-O-Y GDP GROWTH IS STILL SIGNIFICANT Equivalent to the total GDP of Sweden, or two times the GDP of Singapore (US$ billion) 700 600 500 400 300
200 100 0
China (YoY Increase in GDP, 2015-2020)
Sweden (2013 Total GDP)
Singapore (2013 Total GDP)
Source: Oxford Economics (March 2014), International Monetary Fund: World Economic Statistics (Dec 2013). 3
CBRE CHINA RESEARCH
CONSUMPTION WILL EMERGE AS THE MAIN ECONOMIC DRIVER Replacing investment as China undergoes structural change Share of Annual GDP Growth 100% 90%
12.0%
13.0%
80%
70%
32.5% 45.7%
60% 50% 40% 30%
48.6% 41.8%
20% 10%
0%
6.0%
0.5% 2011-2020
2000-2010 Net Exports
Investment
Private Consumption
Others
Source: Oxford Economics (Mar 2014)
4
CBRE CHINA RESEARCH
AS DISPOSABLE INCOMES AND SPENDING ACCELERATE And at a faster rate than other countries in the APAC region 100%
80%
90% 70% 80% 60%
70% 50%
60% 50%
40%
40% 30% 30% 20% 20%
10%
10% 0%
0%
% Growth in Private Consumption, 2014-2020 (f)
% Growth in Real Disposable Income per Capita, 2014-2020 (f) Source: Oxford Economics (April 2014)
5
CBRE CHINA RESEARCH
WHILE CHINA WILL REMAIN A MAJOR TRADING POWER Taking an increased share of total world trade 5,000
China: Total Exports and Imports, ($ Billions)
Share of Total World Trade (%)
10%
4,500
9%
4,000 8%
3,500 3,000
7%
2,500
6%
2,000 1,500
5%
1,000 4%
500 0
3% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Oxford Economics (Mar 2014)
6
CBRE CHINA RESEARCH
IMPROVING EFFICIENCY ACROSS THE LOGISTICS NETWORK Where China lags behind other countries World Bank Logistics Performance Index 2007
4.2
2010
2012
2014
4
3.8
3.6
3.4
3.2
3 Hong Kong
Germany
United States
United Kingdom
Australia
China
Source: World Bank (2014)
7
CBRE CHINA RESEARCH
AND DRIVING A BUILD-OUT IN MODERN WAREHOUSE STOCK Where China is, again, far behind more developed markets Logistics Space per Capita
Logistics costs as % GDP in 2008
(sm per capita)
6
20%
5.06
5
18% 16% 14%
4
12% 3
10% 8%
2 1
6% 4% 0.41
2% 0%
0 China
China
United States
United States
Source: China Association of Warehouses and Storage, US Census Bureau (2012), GLP (2013). 8
CBRE CHINA RESEARCH
CURRENT TRENDS IN CHINA’S LOGISTICS MARKETS
LOGISTICS RENTAL INDEX
Tier-1 city
180
Tier-2 city
Rental Index ( 2003 Q1 = 100)
160
140
120
100
Q1 14
Q3 13
Q1 13
Q3 12
Q1 12
Q3 11
Q1 11
Q3 10
Q1 10
Q3 09
Q1 09
Q3 08
Q1 08
Q3 07
Q1 07
Q3 06
Q1 06
Q3 05
Q1 05
Q3 04
Q1 04
Q3 03
Q1 03
80
Source: CBRE Research Footnote 1: Tier 1: Beijing, Guangzhou, Shanghai and Shenzhen. Tier 2: Chengdu, Chongqing, Nanjing, Tianjin, Hangzhou, Dalian, Wuhan Footnote 2: Rents are quoted on a net basis, excluding taxes and service charges
10
CBRE CHINA RESEARCH
LOGISTICS RENTS GREW FASTER THAN OTHER SECTORS 3.5%
Logistics
Retail
Office
3.0%
2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2012.1
2012.2
2012.3
2012.4
2013.1
2013.2
2013.3
2013.4
2014.1
-0.5% -1.0%
Source: CBRE Research (April 2014)
11
CBRE CHINA RESEARCH
DESPITE AN INCREASE IN INDUSTRIAL LAND SUPPLIES RESIDENTIAL
COMMERCIAL
INDUSTRIAL
OTHER
(million sm) 3,000 35
2,500 40 22
2,000
766 565
748 557
1,500 7
1,000
811 47
256
354 391
354 156
500
1,259
1,204
1,333 1,018
791
2009
2010
2011
2012
2013
Source: CBRE Research (March 2014).
12
CBRE CHINA RESEARCH
13 1Q 2014
3Q 2013
1Q 2013
3Q 2012
1Q 2012
3Q 2011
1Q 2011
3Q 2010
Tier-1
1Q 2010
3Q 2009
1Q 2009
3Q 2008
1Q 2008
3Q 2007
1Q 2007
3Q 2006
1Q 2006
3Q 2005
1Q 2005
3Q 2004
1Q 2004
3Q 2003
1Q 2003
Land Price Index Base = Q1 2003)
LAND PRICES CONTINUED TO RISE Tier-2
260
240
220
200
180
160
140
120
100
80
Source: CBRE Research (Q1 2014)
CBRE CHINA RESEARCH
WAREHOUSE LAND TRANSACTIONS ARE LOW IN KEY CITIES But are relatively high in lower-tier cities Total Sales of Land Parcels for Warehouse Development in 2013
(sm) 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000
0 Shenzhen
Shanghai
Beijing
Guangzhou
Wuhan
Chengdu
Chongqing
Source: CBRE Research, Soufun, Municipal Government Land Market Websites (April 2014)
14
CBRE CHINA RESEARCH
BUT HIGHER IN ‘SATELLITE CITIES’ NEAR MEGA CITIES Kunshan and Langfang are located outside Shanghai and Beijing, respectively. Total Sales of Land Parcels for Warehouse Development in 2013 (sm) 700,000 600,000
500,000 400,000 300,000
200,000 100,000 0 Beijing
Langfang
Shanghai
Kunshan
Source: Soufun, Municipal Government Land Market Websites (April 2014)
15
CBRE CHINA RESEARCH
INDUSTRIAL YIELDS LOOK COMPARATIVELY ATTRACTIVE (%) 9.0
INDUSTRIAL
OFFICE
SHOPPING CENTER
RESIDENTIAL
8.0
7.0 6.7
6.5 6.0
5.1
5.0
Five Year High
5
4.5
Current Cap Rate
4.5
Five Year Low
4.0 3.2
3.0 2.6 2.0 1.0
0.0 BJ
SH
BJ
SH
BJ
SH
BJ
SH
Source: CBRE Research (Q4 2013)
16
CBRE CHINA RESEARCH
MAJOR DEVELOPERS AND THEIR EXPANSION PLANS
KEY DEVELOPERS HAVE EXPANDED THEIR FOOTPRINT
Source: CBRE Research (April 2014).
18
CBRE CHINA RESEARCH
CURRENT LOGISTICS FACILITES MARKET Supply: Standard warehouse stock is limited and market share is concentrated According to the China Association of Warehouses and Storage, there was a total of 698 million sm of commercial warehouse space in China as of 2012. Modern logistics space held by the top 12 logistics operators tracked by CBRE totaled just 13 million sm as of the end of 2013.
Modern Logistics Facilities only Accounted for <2% of total
Major Logistics Developers’ Market Share (as of Q4 2013)
China Logistics Facilities Stock 800
698
700 600
500 400 300 200 100
13
0
Modern Logistics Facilities
Total Logistics Facilities
Source: CBRE Industrial Database, Q4 2013.
Source: CBRE Industrial Database, Q4 2013.
19
CBRE CHINA RESEARCH
AND WILL FURTHER EXPAND THEIR SPACE IN 2014 With GLP being the dominant player… Total
GLP
Mapletree
Goodman
Prologis
e-Shang
12
10
8
6
4
2
0 2010
2011
2012
2013
2014 (F)
Source: CBRE Research (April 2014)
20
CBRE CHINA RESEARCH
DEVELOPERS ARE RAPIDLY BUILDING THEIR LAND BANK (sm)
GLP
Goodman
12
10 4.3
8
6
4
2.1 6.5
2 2.7
0 2012
2014
Source: Company Reports (2014).
21
CBRE CHINA RESEARCH
WITH LOWER TIER CITIES SEEING A SUBSTANTIAL INCREASE 2010 (Built and Under Construction)
2013(Built and Under Construction)
500,000 450,000 400,000 350,000 300,000 250,000
200,000 150,000 100,000 50,000 0
Langfang
Chongqing
Ji'nan
Source: CBRE Research (April 2014).
22
CBRE CHINA RESEARCH
CURRENT DISTRIBUTION OF MODERN LOGISTICS FACILITIES
Source: CBRE Research (April 2014). Note: The statistics are based on 12 major developers in industrial sector in China, including GLP, Goodman, Blogis, Prologis, Mapletree, Yupei, PGL, e-Shang, CBRE GI, Galazeley, Vailog and Dongjiu. 23 CBRE CHINA RESEARCH
WHICH WILL CHANGE AS DEVELOPERS MOVE INLAND
Source: CBRE Research (April 2014) Note: The statistics are based on 12 major developers in industrial sector in China, including GLP, Goodman, Blogis, Prologis, Mapletree, Yupei, PGL, e-Shang, CBRE GI, Galazeley, Vailog and Dongjiu.
24
CBRE CHINA RESEARCH
OCCUPIER DEMAND DRIVERS
E-COMMERCE
E-COMMERCE PLAYERS HAVE SPREAD THEIR OPERATIONS
Shenyang Beijing Tianjin Ji’nan
Xi’an
Xuzhou Zhengzhou Hefei
Chengdu
Jingdong
Wuhan
Yihaodian
Dangdang
Letao
Amazon
Qingdao
Nanjing Wuxi Suzhou Shanghai Jiaxing Hangzhou
Chongqing
Xiamen Guangzhou
Vancl
New Egg
Walmart
Suning
Shenzhen
Source: CBRE Research
27
CBRE CHINA RESEARCH
AND PLAN FOR MORE SELF-OCCUPIED FACILITIES IN THE FUTURE E-commerce enterprises
Warehouses
JD.com
Self-built and Leasing
•Launched two warehouses in Chongqing in June with a total area of 40,000 sm. •More than 20 warehouses are under construction.
Tencent
Self-built and Leasing
•Six distribution centers in Beijing, Shanghai, Shenzhen, Chongqing, Xi’an and Wuhan. •A 230,000-sm warehouse in Qingpu, Shanghai is under construction and will be completed in 2014.
Trends on Warehouse Development
• More than 23 logistics centers with a total area of more than 500,000 sm • To build 45 warehouses nationwide in 2014 and more than 100 warehouses in the next three years.
Dangdang.com
Self-built and Leasing
Alibaba
Self-built and Leasing
• Secured land in Tianjin, Wuhan, Zhengzhou, Chongqing, Chengdu, Dongguan and etc.. • Acquired 260 mu land in Jiading, Shanghai in 2012. • Warehouses in Wuqing, Tianjin completed and started leasing.
Suning.com
Self-built and Leasing
• To build 60 logistics bases and 12 auto-warehouses in 2015.
Amazon
Self-built and Leasing
• Owns 13 warehouses with a total area of 850,000 sm
VANCL
Self-built and Leasing
• To build self-owned logistics facilities to cover tier-1 cities
Self-built and Leasing
• Had built 40,000 sm warehouses nationwide in the end of 2013. • Aquired 900 mu land in Zhaoqing, 300 mu in Kunshan with GLP, 300 mu in Wuqing, 1,500 in Ezhou, 1,500 in Chengdu, and 900 mu in Guangzhou which will be the largest logistics center in South China. • More than 6,000-mu land to build warehouses and VIP.com will utilize 60% of them after completion.
VIP.com
28
CBRE CHINA RESEARCH
AS SECTOR REVENUES HAVE SEEN RAPID GROWTH Online Sales
(RMB bn)
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
2005
2006
2007
2008
2009
2010
2011
2012
2013
…
2017E
Source: China E-Commerce Research Center (2013)
29
CBRE CHINA RESEARCH
WITH B2C ONLINE SALES TAKING A LARGER SHARE B2C
C2C
100% 90% 80% 70% 74.7%
60%
50%
92.2%
70.4%
64.9%
54.3%
59.2%
50.6%
47.6%
86.3%
40% 30% 20% 25.3%
10% 0%
7.8%
2009
29.6%
35.1%
45.7%
40.8%
49.4%
52.4%
13.7%
2010
2011
2012
2013
2014(F)
2015 (F)
2016 (F)
2017 (F)
Footnote: C2C = consumer-to-consumer; B2C = business-to-consumer Source: CBRE Research (2014)
30
CBRE CHINA RESEARCH
THIRD PARTY LOGISTICS
DOMESTIC 3PLS ARE BUILDING THEIR NETWORKS
D D
Harbin
Shenyang
D Langfang
B Xian D Y Chongqing
D
Nanjing D B Yangzhou D Y B Suzhou D Y D B B B HefeiChangzhou Nantong B B Wuhan Wuhu
B
Deppon
Xiamen
B Y
Best Logistics
B
Yunda
B Nanning
Zhongshan
Source: GLP, CBRE Research (Mar 2014).
32
CBRE CHINA RESEARCH
DRIVING LEASING DEMAND Tenant
Date
Project
Deppon Deppon Deppon Deppon Deppon Deppon Deppon Deppon Best Logistics Best Logistics Best Logistics Best Logistics Best Logistics
2013.1 2013.1 2013.1 2013.1 2013.4 2013.4 2013.4 2014.1 2013.2 2013.2 2014.1 2014.1 2014.1
Best Logistics
2014.1
Best Logistics Best Logistics Best Logistics
2014.1 2014.1 2014.1
Best Logistics
2014.1
Best Logistics Yunda
2014.1 2013.3
Yunda
2013.4
Yunda
2014.1
GLP Park Jiangxia Phase I GLP Park Hanan GLP Park Langfang GLP Park Hefei Hi-Tech Phase I GLP Park Wangting GLP Park Hunnan Goodman Lishui Distribution Center GLP Park Yangzhou Phase I GLP Park Suzhou SND GLP Park Huangpi GLP Park Zhongshan GLP Park High-Tech Zone Xian GLP Park CND GLP Park Nantong Economic & Technology Development Area GLP Park Yangzhou Phase I GLP Park Jinjiang GLP Park Jiujiang GLP Park Nanning Economic Development Area GLP Park Feidong GLP SND Goodman Hefei EDTA Distribution Center Phase I Goodman Chongqing Airport
Leased area (sm)
Province
City
Developer
68,000 23,000 53,000 24,000 18,000 7,000 63,400 16,000 23,000 19,800 34,000 19,000 16,000
Hubei Heilongjiang Hebei Anhui Jiangsu Liaoning Jiangsu Jiangsu Jiangsu Hubei Guangdong Shanxi Jiangsu
Wuhan Haerbin Hebei Hefei Suzhou Shenyang Nanjing Yangzhou Suzhou Wuhan Zhongshan Xian Changzhou
GLP GLP GLP GLP GLP GLP Goodman GLP GLP GLP GLP GLP GLP
16,000
Jiangsu
Nantong
GLP
10,000 13,000 8,000
Jiangsu Fujian Anhui
Yangzhou Xiamen Wufu
GLP GLP GLP
6,000
Guangxi
Nanning
GLP
21,000 32,000
Anhui Jiangsu
Hefei Suzhou
GLP GLP
29,300
Anhui
Hefei
Goodman
46,700
Chongqing
Chongqing
Goodman
Source: GLP, Goodman, CBRE Research
33
CBRE CHINA RESEARCH
AND BECOMING A KEY OCCUPIER GROUP 0%
20%
40%
60%
80%
100%
2013
2012
2011
Retail & Catering
3PL
FMCG
Electrical Goods
Auto
Others
Medical
Machinery
Source: GLP Annual Reports, 2011-2013
34
CBRE CHINA RESEARCH
A CLOSER LOOK AT KEY MARKETS
BEIJING (sm)
New Developments
Rent (RHS)
Vacancy
Rent (RMB per sqm)
350,000
14%
40
300,000
12%
250,000
35
200,000
30
150,000
10% 8% 6%
25
100,000
4% 20
50,000 0
2% 0%
15 2011
2012
2013
2014 (f)
Source: CBRE Research (Apr 2014)
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014
Source: CBRE Research (Apr 2014)
• Rent growth plateaued in 2013, as more occupiers moved to markets like Langfang and Tianjin due to high rent in Beijing
• Supply in 2014 is expected to increase 45% y-o-y, which should alleviate the tight supply situation but will cap rental growth in the near term • Solid demand from e-commerce, retailers and 3PLs in Q1 2014 resulted in a 2% q-o-q increase in rents. • 2014 Rent Outlook: 3-5% 36
CBRE CHINA RESEARCH
BEIJING: GLP IS THE DOMINANT PLAYER
Completed GFA (sm)
GFA Under Construction (sm)
Land Bank (sm)
GLP
696,600
159,078
607,000
Goodman
42,000
58,370
-
Mapletree
14,073
-
-
Yupei
0
-92,000
-
China Resources Logistics
49,000
44,000
-
Source: CBRE Research (2013). 37
CBRE CHINA RESEARCH
SHANGHAI New Developments (LHS)
Prime Rent (RHS)
(sm)
Vancancy
(RMB per sm per month)
800,000
14%
40
700,000
12% 35
600,000
10%
500,000
8%
30 400,000
6%
25
300,000
4%
200,000 20
2%
100,000 0
0%
15 2007
2008
2009
2010
2011
2012
2013 2014 (F)
Q3 2012
Source: CBRE Research (Apr 2014)
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Source: CBRE Research (Apr 2014)
• Rents for low-to mid-end warehouses have risen sharply in recent months • A significant uptick in new supply completions in 2014 up approximately 650,000 square meters on 2013 • Demand will remain strong in 2014, particularly since we expect progress on the Shanghai Free Trade Zone • Q1 2014: prime rents up 5.2% q-o-q
• 2014 Rent Outlook : 8-10% 38
CBRE CHINA RESEARCH
SHANGHAI: A MORE COMPETITIVE MARKET Completed GFA (sm)
GFA Under Construction (sm)
Blogis
317,729
-
GLP
1,708,292
783,000
Goodman
506,883
150,500
Mapletree
157,444
0
Yupei
211,654
126,000
Dongjiu
17,462
0
e-Shang
141,205
117,258
Vailog
42,270
226,999
Source: CBRE Research (2013). 39
CBRE CHINA RESEARCH
SHANGHAI â&#x20AC;˘ Developers have increasingly been looking out of town for sites in districts such as Songjiang and Fengxian, as well as in satellite cities such as Kunshan, Taicang and Jiaxing, which have become more viable for development because of better availability of land supply and improved infrastructure. â&#x20AC;˘ These locations also serve as a strategic supply point for major industrial zones and other key markets in neighboring cities such as Suzhou and Nanjing.
Developer
Location
Project Name
GFA (sm)
Status
Blogis
Kunshan
Blogis Kunshan
130,000
Built
Goodman
Kunshan
Goodman Lujia Logistics Centre
381,100
Built
Goodman
Fengxian
Goodman Fengxian International Logistics Park
125,800
Built
Yupei
Shanghai
Northwest Logistics Park
60,000
Built
e-shang
Kunshan
Kunshan Huaqiao Logistics Park - Phase 1
133,615
Built
GLP
Fengxian
GLP Park Fengxian Seaport
44,000
Under construction
GLP
Taicang
GLP Park Taicang
101,000
Under construction
Goodman
Jiaxing
Goodman Yaozhuang Logistics Centre
50,500
Under construction
Yupei
Kunshan
Yupei Kunshan Logistics Park
126,000
Under construction
Vailog
Shanghai
Songjiang DP
115,999
Under construction
Source: CBRE Research (April 2014) 40
CBRE CHINA RESEARCH
GUANGZHOU New Developments (LHS)
(sm)
Rent (RHS) Vacancy
RMB per sqm. per month
400,000
40
14%
350,000
12%
35
300,000
10%
250,000
30
8%
200,000
6%
25
150,000
4%
100,000
20
2%
50,000 0
15 2008
2009
2010
2011
2012
2013
0%
2014 (F)
Source: CBRE Research (Apr 2014)
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
Source: CBRE Research (Apr 2014)
• No new supply in Guangzhou in 2013 • Enquiry levels have been high, particularly from e-commerce, 3PLs and pharmaceutical companies • New supplies of 125,000 sqm in 2014, mostly pre-leased • 2014 Rent Outlook: 6-8%, compared to 2-3% 2012-13
41
CBRE CHINA RESEARCH
GUANGZHOU: LIMITED NEW SUPPLY IN THE PIPELINE Completed GFA (sm)
GFA Under Construction (sm)
Land Bank (sm)
Blogis
18,000
150,000
0
GLP
400,000
0
One project, GFA unknown
Goodman
0
0
40,000
Mapletree
120,000
0
0
Prologis
122,000
0
0
42
CBRE CHINA RESEARCH
EMERGING HUBS
CHENGDU
CHENGDU
44
CBRE CHINA RESEARCH
CHENGDU Basic Profile
• Large urban population: estimated at 7.2 million at the end of 2014 • Rapid urbanization: 38% increase in population expected by 2025 • High performer: GDP growth of 13% in 2012, far outstripping national growth of 7.7% Drivers
• Government support: tax incentives for services and high value-added industries • Cost advantages vs. eastern regions: minimum monthly wage of RMB 1,200, vs. RMB 1,808 in Shenzhen
• Emerging manufacturing base: already home to MNCs, including Intel, HP, Microsoft, Toyota and Volkswagen • New trade hub: linked to rail and road networks that will connect China with Europe, South East Asia and Central
Asia Land Supply • Markets: Looser compared to first-tier cities • Prices: Average transaction price in RMB 275 per square meter in 2013
45
CBRE CHINA RESEARCH
WUHAN
WUHAN
46
CBRE CHINA RESEARCH
WUHAN Basic Profile
• Large population: urban population estimated at 7.2 million at the end of 2014 • Rapid urbanisation: 46% increase in population expected by 2025 • Another high performer: GDP growth of 11.5% in 2012, vs. national growth of 7.7%
Drivers • Central location: key transport link servicing east-west, north-south supply lines
• Well-connected: 4.5 hrs by train to Shanghai, 5 hrs to Beijing and 4 hrs to Guangzhou • Distribution point for rapidly-growing 3rd/4th tier cities: such as Zhengzhou, Changsha and Nanchang
• Auto production hub: home to Peugeot, Nissan, Honda and General Motors
Land Supply • Prices: Average transaction price in RMB 250 per square meter in Q1 2014
47
CBRE CHINA RESEARCH
DEVELOPMENT TRENDS
STRATEGIC OUTLOOK FOR STANDARD WAREHOUSING DEVELOPMENT Developers will expand to cities along the Yangtze River Economic Belt Existing Modern Logistics Facilities in China (as of Q4 2013)
Future Modern Warehouse Distribution in China (by 2016YE)
Source: CBRE Industrial Database, Q4 2013.
Source: CBRE Industrial Database, Q4 2013.
49
CBRE CHINA RESEARCH
STRATEGIC OUTLOOK FOR STANDARD WAREHOUSING DEVELOPMENT E-commerce is penetrating outside of tier-1 cities E-commerce development in China at the county level in 2013
Source: Alibaba Research Centre, Q4 2013 Noteďź&#x161;China E-commerce Development Index Report â&#x20AC;&#x201C; county level published by Ali Research Centre in 2013. Group ranking was obtained as per the Alibaba E-commerce Development Index which is comprised of two equally weighted primary indices, namely, the Netrepreneur Index and the Purchasing Index. The Netrepreneur Index includes two secondary indices on online density and online trading per shop, each with a weight of 0.5. The Purchasing Index includes two secondary indices on online consumer density and online consumption per capita, each with a weight of 0.5.
50
CBRE CHINA RESEARCH
STRATEGIC OUTLOOK FOR STANDARD WAREHOUSING DEVELOPMENT Summary
1
Logistics developers will be more likely to sign master agreements with key tenants to provide logistics facilities across the country;
2
The expansion of logistics developersâ&#x20AC;&#x2122; footprint will be closely aligned with the development and penetration of e-tailing in China;
3
The growing difficulty in acquiring land in strategic locations will likely result in international logistics developers establishing strategic alliances with large domestic developers and/or 3PL firms which have better access to industrial land;
4
As the China logistics market continues to mature, the Built-to-Suit format will be increasingly adopted along with the traditional development of standardized warehouses.
51
CBRE CHINA RESEARCH
REDEVELOPMENT OF OLD INDUSTRIAL STOCK
OVERCAPACITY IN CHINAâ&#x20AC;&#x2122;S MANUFACTURING SECTOR Years of excess investment in industries such as steel, cement and general manufacturing have left China with severe overcapacity issues This has made worse by recent increases in input costs, an appreciating exchange rate and lending curbs
Also, local authorities are putting manufacturers under pressure to develop high-value added products, which may result in excess factory space As such, there may be opportunities in re-developing old industrial bases into modern logistics/warehouse facilities
53
CBRE CHINA RESEARCH
CASE STUDY 1: GOODMAN SUZHOU LOGISTICS CENTRE In 2012, Goodman purchased factory space with a land attachment in West Suzhou Following redevelopment and retrofitting, the space was completed in early 2014
Offers five warehouses with a combined GFA of 95,000 sqm In Q1 2014, Goodman leased 54,880 sqm to Cainiao, with the new space to become an East China Regional Distribution Center for Tmall.com – China’s leading B2C e-commerce site
54
CBRE CHINA RESEARCH
CASE STUDY 2: GLP BAOSHAN, SHANGHAI GLP acquired a former paper factory in 2012 in Baoshan, a traditional industrial area in North Shanghai In total, the site comprises two parcels with a total area of 229,610 sqm GLP is currently demolishing the existing buildings on the site and will develop two warehouses for release in mid-2015
55
CBRE CHINA RESEARCH
CO-OPERATION WITH SOES
COOPERATION WITH SOES Land supply varies across the country, with our data showing relatively more land parcels for warehouse/logistics development in lower-tier cities
However, accessing land markets and cutting through opaque regulations and land allocation practices remains a challenge Relationship networks and bias toward domestic players often clouds or frustrates the process of acquiring land resources The process of acquiring land has become even more challenging as rapid urbanization and structural economic change have ramped up competition for land resources One way of approaching this problem is to seek strategic partnerships with SOEs in China
57
CBRE CHINA RESEARCH
CASE STUDY: GLP AND SINOTRANS
In February, GLP signed a strategic partnership with Sinotrans, Chinaâ&#x20AC;&#x2122;s largeststate-owned third-party logistics company GLP will cooperate with Sinotrans to develop a national network of logistics facilities Initially, the two companies will cooperate and develop new facilities in Shanghai and Guangdong The deal is significant for GLP because it offers them a partnership with a company which has access to strategic land holdings As the 3PL sector undergoes expansion, Sinotrans is looking to build out its network of logistics facilities across China 58
CBRE CHINA RESEARCH
SUMMARY
Macro •
GDP: China’s economy is slowing but 6.9% average y-o-y growth between 2014-2020 still represents an additional US$601 billion per year
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Consumer: private consumption will emerge as a main economic driver, growing by an average of US$ 250 billion per year between 2014 and 2020
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Structural Change: inland provinces will contribute a greater share of output, as companies relocate to exploit cost advantages and rapidly growing consumer markets
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Infrastructure: build-out will support economic rebalancing to inland regions and result in the emergence of new trade hubs
China’s Logistics Markets •
Rents and yields: industrial rent growth has outperformed other asset classes during 2013 and yields look comparatively attractive
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Land prices: prices for industrial land have increased, particularly in first-tier cities
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Land supply: tight in first-tier cities, but comparatively looser in lower-tier cities and ‘satellite’ cities around key first-tier cities
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Development pipelines: general increase in 2014, major developers are targeting lower-tier cities, ‘satellite city’ locations and inland regions
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CBRE CHINA RESEARCH
Demand Drivers •
E-commerce: penetration is relatively low in inland provinces
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Infrastructure build-out : new trade hubs are emerging in underdeveloped regions
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E-commerce/3PL occupiers: are building their networks to capture rapid revenue growth
Key Markets •
Beijing: New supply, vacancy upticks expected in 2014. Y-o-y rent increases of 3-5% forecast for 2014
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Shanghai: Burgeoning demand will drive rent growth of 8-10% in 2014
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Guangzhou: Historically undersupplied. New supplies of 125,000 sqm expected in 2014. Rents expected to grow 6-8% y-o-y (2013: 3% y-o-y) on robust demand
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Chengdu: Rental growth of 4-6% y-o-y following supply uptick in 2014
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CBRE CHINA RESEARCH
Risks •
Oversupply?: logistics warehouse development is attracting a lot of investment capital, major domestic players (such as Vanke) are entering the market. Development pipelines have grown markedly and developers have expanded their land banks
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Rising operation costs: China’s cost of labor advantage is eroding
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Opaque land allocation practices: land markets are controlled by local authorities who may favor domestic players; however, supply prospects in lower-tier and new ‘satellite’ cities may be better, given the need to buildout infrastructure to support the government’s new consumer-led economic growth model
Opportunities •
Macro: The potential for China’s consumer market is huge
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Emerging trade hubs: such as Chengdu and Wuhan will emerge as key distribution points to support inland regions
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New trade routes: overland transport links are being developed to connect China with South East Asia, Central Asia and Europe
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Redevelopment of old industrial stock: China has excess industrial capacity
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Cooperation with domestic players/SOEs: may sidestep land supply constraints
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CBRE CHINA RESEARCH
Thank you ! Q&A For more information regarding this presentation please contact: Frank Chen, CFA
Executive Director, Head of Research, China D +86 21 2401 1369 F +86 21 5403 7430 Email: frank.chen@cbre.com.cn