Although the 3PL market is still at an embryonic stage in China, it has huge potential, driven by World Trade Organisation related policy changes, buoyant merchandise trade, a strong domestic manufacturing sector and intensifying rivalry among suppliers of manufactured goods. This competition is leading to more efficient and professional supply chain management so as to improve the cost-competitiveness of their products in the marketplace.
China’s logistics market has grown significantly over the past decades, particularly in recent years. All four major forms of transportation (Railway, Highway, Waterway and Civil Aviation) have witnessed strong growth. In response to the rapidly expanding freight market, cities and provinces across the country are drawing up development plans in order to create a more efficient logistics system. From a humble start in the 1990s, modern logistics park development is still relatively immature in China. Previously, only large markets like Shanghai and Shenzhen had logistics development listed in their Five-Year plan. Currently, almost all provincial capitals and prefecture cities have included logistics development in their latest Five-Year plan.
Being the “nodes” of a modern logistics network, logistics parks are an important part of a government’s development plans. Over the past several years, the supply of logistics space has grown significantly.
Shanghai is the largest city in China in terms of population and one of the largest metropolitan areas in the world, with over 20 million people living in its extended metropolitan area. Shanghai is also one of China’s four provincial-level, self-governed municipalities. The other three municipalities are Beijing, Tianjin, and Chongqing. The Shanghai municipal government has been actively developing the logistics industry and has attracted significant foreign investment interests. The demand for logistics properties in the city has been especially high, fuelled by the entry of foreign logistics service providers and multinational companies, with the liberalization of China’s logistics industry.
Shanghai has the country’s largest seaport and the second-largest airport in terms of air-freight throughput. It also boasts the largest retail sales and industrial output in China. The demand for all types of logistics space is stronger in Shanghai than anywhere else in China. With the advantages of deep-water ports, airports, land transport and having full port facilities, Shanghai is developing 4 major logistics parks located at WaiGaoQiao, Pudong Airport, Northwest and the Yangshan deep-water port.
WaiGaoQiao Logistics Park, enjoying the advantages of the harbor area and free trade area, has developed into a well known distribution center for bonded commodities used by many multi-national corporations. With the positioning of Shanghai as the aviation hub in Asian-Pacific region, Pudong Airport Logistics Park is an aviation logistics hub with comprehensive services. Northwest Logistics Park has developed into a well known inter-provincial distribution center for the logistics industry, servicing the Yangtze River Delta and inner provinces through land transportation. The Yangshan deep-water port Logistics Park is developing into one of the most important port logistics zones which link local logistics networks with the international logistics networks and shipping centers in Northeast Asia.
Looking forward, Shanghai’s industrial market is likely to stay robust on the back of sustained demand from end-users. Shanghai’s good infrastructure will continue to attract major industrial players to set up headquarters, research and development (R&D) centers and logistics facilities.
Guangzhou has been the most economically dynamic region of the China since the launch of the nation’s reform program in 1979. In recent years, the municipal government in Guangzhou has been aggressively promoting the region as a logistics hub, leveraging on its status as an epicenter for manufacturing, its well established transportation network and rapidly developing logistics infrastructure. With the opening of the logistics industry to foreign players in 2006, the continual support from the municipal government to develop the industry and expanding production hubs there, demand for warehouses in Guangzhou is expected to grow from strength to strength.
Affirming to the popularity of Guangzhou as a manufacturing location, investments continued to flow in, especially from Hong Kong and Macau. Demand for industrial properties is expected to strengthen on the back of continued inflows of manufacturing investments.
In Beijing, demand for logistics services is underpinned by the fact that the city is China’s largest trading market for information technology and computer accessory products and that it boasts one of the country’s largest retail markets. There is strong demand for quality, bonded logistics facilities in Beijing. With the government’s directions to make the land market more transparent and to prevent under-pricing, capital values are expected to rise moderately.
The Government’s shift in industry orientation to high-tech industries (e.g. technology research, bio-pharmaceuticals and light manufacturing sectors) triggered a strong demand for standardized factory space. Rising office rents in the Downtown have also resulted in an increase in demand for office properties in industrial parks. With the combined effects of tight industrial land market, sustained demand for logistics properties as well as strong outlook for industrial park developments, the industrial land price is expected to continue to grow moderately.
Another promising logistics market is located in Tianjin, a coastal city situated in North Eastern China. Logistics activities in the city are currently centered around Tianjin Airport and in the Binhai New Area, which consists of the Tianjin Port and the Tianjin Economic Technological Development Area (TEDA). The central government has identified logistics as a key growth area for the city, and strongly supported municipal plans to develop the Binhai New Area and enhance the city’s logistics infrastructure. With the Tianjin Port – the largest in North China – poised to grow its cargo throughput over the next few years, the city’s logistics market is set to thrive, which in turn boosts the demand for logistics properties.