China remains undersupplied with international-grade warehouse facilities, but the logistics real estate sector offers long-term growth prospects, according to a new report from Jones Lang LaSalle.
Logistics was among the sectors Jones Lang LaSalle, a financial and professional services firm specializing in real estate, discussed in China50, a report on 50 Chinese real estate markets.
The report said long-term growth prospects for developers, manufacturers and third-party logistics providers will be boosted by improving transport infrastructure, retail growth and a shift inland of China’s manufacturing base, but the growth comes from a low base.
“Despite the sector’s huge growth potential, the logistics market remains largely untapped and significantly undersupplied, which is a continuing constraint on market modernization,” the report said.
The report said the existing stock of “international-grade” logistics facilities “totals only 13 million square meters, barely equivalent to the warehousing stock of Boston.” Of that, 60 percent is in Tier 1 cities, mostly in the Shanghai-Suzhou region in the Yangtze River delta.
International-grade warehouse facilities are expected to grow to 20 million square feet by mid-decade, but most of this will be in existing primary logistics hubs. Other regions, particularly in north, south and west China, will remain undersupplied.
Although the report cited opportunities for development of industrial real estate in China, it said growth will be constrained by high land prices in many cities, regulatory barriers, and the low status that most local governments assign to the sector.