CBRE: Seize the window of opportunity for logistics investment in first-tier cities in the next two years

Data source : CBRE Research, April 2023

Beijing

Constructing four major logistics bases

According to the Beijing Logistics Special Plan released in 2020 , Beijing will focus on building a "3+1" urban logistics node network system of " large-scale comprehensive logistics park (logistics base) + logistics center + distribution center " + " terminal outlets " . Beijing currently has four logistics bases, namely: Shunyi Airport Logistics Base + Tianzhu Comprehensive Bonded Zone, Tongzhou Majuqiao Logistics Base, Daxing Jingnan Logistics Base, Pinggu Mafang Logistics Base. In the next three years, 90% of Beijing's new supply of high-standard warehouses will be concentrated in these four bases.

From 2023 to 2025 , CBRE expects that Beijing will have a total of about 690,000 square meters of new projects delivered, and the overall supply level will be 30% lower than the previous three years ( 2020-2022 ) . On the demand side, Beijing will continue to attract e-commerce and third-party logistics companies to expand with its important consumer market and strategic position, and the advanced manufacturing industries such as automobiles and pharmaceuticals that have accelerated in recent years are expected to become new growth points for high-standard warehouse demand.

Overall, the shortage of supply will be the keynote of Beijing's logistics and warehousing market, and will drive the rental of high-standard warehouses to rise steadily at an annual rate of 2%-4% . At the same time, as an important satellite market around Beijing, Langfang will continue to benefit from the spillover demand from the Beijing market.

Logistics Development Fundamentals ( 2022 )

GDP :

4.16 trillion

Total retail sales of consumer goods:

1.38 trillion yuan

Express delivery volume:

1.96 billion

Import and export amount:

3.64 trillion yuan

Cargo transport volume1 :

240.37 million tons

Note 1 : Includes freight transport volume by road, rail, airport and water transport

Warehousing and logistics market ( 2022 )

Stock:

3.37 million square meters

Storage area per capita:

0.157 m2

Vacancy rate:

16.4%

Average rent:

57.0 yuan / square meter / month

Compound annual growth in rent over the past three years:

3.8%

Main demand industries 2 :

E-commerce ( 31% ), third-party logistics ( 27% ) and manufacturing ( 26% )

Note 2 : Based on analysis of major new lease transactions in the local market over the past three years

Forecast 2023-2025

New supply:

690,000 square meters

Annual rental growth rate:

twenty four%

Market distribution and stock size of major high-standard warehouses in Beijing

(square meters)

Data source : National Bureau of Statistics, Ministry of Transport, local statistical bureaus, CBRE Research Department, April 2023

Shanghai

Rising Twin Stars

As the country's largest consumer market and the world's largest port, Shanghai is the most active high-standard warehouse market in terms of supply and demand among first-tier cities. The large concentration of logistics and express delivery companies is an important feature of the Shanghai market: in the past three years, third-party logistics tenants accounted for nearly 70% of all new logistics leasing areas .

From 2023 to 2025 , Shanghai's high-standard warehouse market will see a phased supply increase of about 2.3 million square meters. However, it is highly concentrated in terms of location distribution: Jinshan and Lingang account for 63% , and will rise to become the twin stars of Shanghai's logistics nodes.

Adjacent to Yangshan Deepwater Port, Lingang is Shanghai's most important import and export logistics port. During the 14th Five-Year Plan period, the industrial output value of the Lingang New Area of ​​the Shanghai Free Trade Zone is planned to grow by 25% annually , which will further promote the growth of warehousing and logistics demand related to new energy vehicles and equipment manufacturing.

The delivery of high-quality warehousing facilities will further strengthen Jinshan's role as a logistics hub connecting Shanghai and the Yangtze River Delta. In the future, with the construction of two transportation hubs, Jinshan Station and Jinshan North Station, and the construction and reconstruction of 20 trunk roads such as G320 and G228 , Jinshan's logistics convenience and radiation are expected to continue to improve.

The obviously skewed supply structure means that core logistics sub-markets such as Minhang, Songjiang, Pudong Airport, Hongqiao and Qingpu will continue to be in short supply, and the vacancy rate is expected to remain below 5% for a long time in the next three years .

E-commerce logistics development ( 2022 )

GDP :

4.47 trillion

Total retail sales of consumer goods:

1.64 trillion yuan

Express delivery volume:

2.86 billion

Import and export amount:

4.2 trillion yuan

Container throughput:

47.3 million TEUs

Cargo transportation volume:

141,373.6 million tons

Warehousing and logistics market ( 2022 )

Stock:

7.13 million square meters

Storage area per capita:

0.286 m2

Vacancy rate:

9.3%

Average rent:

49.6 yuan / square meter / month

Compound annual growth in rent over the past three years:

1.9%

Main demand industries:

Third-party logistics ( 67% ), e-commerce ( 17% ), and wholesalers and retailers ( 10% )

Forecast 2023-2025

New supply:

2.3 million square meters

Annual rental growth rate:

1.5%- 2.5%

Market distribution and stock size of major high-standard warehouses in Shanghai

(square meters)

Data source : National Bureau of Statistics, Ministry of Transport, local statistical bureaus, CBRE Research Department, April 2023

Guangzhou

Huadu One Super Many Strong

According to the " 14th Five-Year Plan for Modern Logistics Hubs and Industrial Development Land Use in Guangzhou " , Guangzhou will build five large-scale transportation and logistics hubs: Guangzhou Airport Logistics Hub (Huadu), Guangzhou Nansha Port Logistics Hub (Nansha), Guangzhou Railway Container Center Station Road-Rail Intermodal Hub (Baiyun), Guangzhou Eastern Road-Rail Intermodal Hub (Zengcheng), and Guangzhou-Qingyuan Airport Modern Logistics Industry New City (Qingyuan City). From the perspective of Guangzhou's warehousing and logistics land transfer in 2021-2022, 75 % of the land transfer is located in Huadu, which is the Guangzhou Airport Logistics Hub area, and the rest is located in Baiyun and Zengcheng.

Guangzhou is the most developed city in the country for cross-border e-commerce. In 2022 , the cross-border e-commerce declarations of Guangzhou Customs exceeded 250 billion yuan in import and export commodities, an increase of more than 70% year-on-year. Cross-border e-commerce has become the main driving force for the demand for high-standard warehouses in Guangzhou, contributing 40% of the new leased area in the past three years . Baiyun Airport and Nansha Port are the two major ports for cross-border e-commerce in Guangzhou, and are also the top two sub-markets in terms of the scale of high-standard warehouses in Guangzhou.

The latest "Guangzhou International Consumption Center City Development Plan ( 2022-2025 )" clearly proposes to build Guangzhou Airport and Nansha Port into international hub ports for cross-border e-commerce. In the next three years, Huadu and Baiyun near Baiyun Airport are expected to deliver 790,000 high-standard warehouses, accounting for 58% of the new supply in the next three years , which will attract further concentration of major cross-border e-commerce and third-party logistics companies.

E-commerce logistics development ( 2022 )

GDP :

2.88 trillion

Total retail sales of consumer goods:

1.03 trillion yuan

Express delivery volume:

10.13 billion pieces

Import and export amount:

1.09 trillion yuan

Container throughput:

24.6 million TEUs

Cargo transportation volume:

905.11 million tons

Warehousing and logistics market ( 2022 )

Stock:

3.035 million square meters

Storage area per capita:

0.161 m2

Vacancy rate:

9.9%

Average rent:

40.4 yuan / square meter / month

Compound annual growth in rent over the past three years:

3.1%

Main demand industries:

Cross-border e-commerce ( 40% ), e-commerce ( 23% ) and third-party logistics ( 22% )

Forecast 2023-2025

New supply:

1.37 million square meters

Annual rental growth rate:

1.5%- 2.5%

Distribution and scale of major sub-markets of high-standard warehouses in Guangzhou

(square meters)

Data source : National Bureau of Statistics, Ministry of Transport, local statistical bureaus, CBRE Research Department, April 2023

Shenzhen

Supply continues to be tight

Shenzhen is the smallest city among the four first-tier cities, only roughly equivalent to 1/8 of Beijing, and 1/3 of Guangzhou or Shanghai . The scarcity of land resources has become the norm and a major bottleneck restricting urban development. Therefore, intensive development has been emphasized for many years. However, due to the particularity of the buildings on it, the degree of intensiveness and output efficiency of warehousing land are low, so the amount of land sold in Shenzhen is extremely limited. According to the public data of the Shenzhen Land Trading Platform, there were a total of 29 warehousing lands publicly sold in the 16 years from 2007 to 2022 , with an average annual supply of less than 2 plots. The scarcity of supply is obvious at a glance.

Since 2016 , the vacancy rate of Shenzhen's warehousing and logistics market has remained below 5% . In the past five years, the new supply has been only 270,000 square meters, and the per capita warehousing area is only 0.153 square meters, the lowest in the country, far from meeting market demand.

Structurally, 73% of warehouses are bonded warehouses, serving imports and exports, and their current tenants are mainly third-party logistics and manufacturing industries. E-commerce and logistics companies serving local residents in Shenzhen, as well as manufacturing companies, are partially located in ordinary warehouses and high-standard warehouses in surrounding cities such as Dongguan and Huizhou. Currently, not only is it difficult to find a warehouse in Shenzhen, but the rentable area in Dongguan and Huizhou is also quite limited, with vacancy rates below 10% , and the annual rent increase has been as high as 4% in the past five years .

In 2023 , Shenzhen will have a new supply of 130,000 square meters, located in the Longhua Guanlan Logistics Park. In the foreseeable future, Shenzhen's new supply will remain very limited, with the vacancy rate remaining below 3% in the next three years and rents maintaining an increase of around 3%-4% .

E-commerce logistics development ( 2022 )

GDP :

3.24 trillion

Total retail sales of consumer goods:

0.97 trillion yuan

Express delivery volume:

5.8 billion

Import and export amount:

3.7 trillion yuan

Container throughput:

30.04 million TEUs

Cargo transportation volume:

407.71 million tons

Warehousing and logistics market ( 2022 )

Stock:

2.7 million square meters

Storage area per capita:

0.153 m2

Vacancy rate:

0.7%

Average rent:

48.7 yuan / square meter / month

Compound annual growth in rent over the past three years:

2.0%

Main demand industries:

Third-party logistics ( 85% ) and manufacturing ( 10% )

Forecast 2023-2025

New supply:

130,000 square meters

Annual rental growth rate:

3%- 4%

Distribution and scale of major logistics parks in Shenzhen (square meters)

Data source : National Bureau of Statistics, Ministry of Transport, local statistical bureaus, CBRE Research Department, April 2023

Seize the opportunities in first-tier cities in the next two years

A window of opportunity for logistics investment

According to the 2023 China Investor Intention Survey Report released by CBRE at the beginning of the year , industrial logistics has become the most favored property type by investors for the third consecutive year, with 56% of investors choosing it as their first choice for investment this year. Judging from the fundraising activities of private real estate funds in the Asia-Pacific region since the outbreak, more than two-thirds of the funds focused on China plan to invest in the industrial logistics sector.

Last year, the People's Bank of China's continuous interest rate cuts created a good environment for real estate investment. Currently, the average capitalization rate of high-standard warehouses in first-tier cities is around 5% , and the interest rate spread with the five-year LPR is nearly 70 basis points, the highest since the LPR data was released in 2019 .

In the medium and long term, investment in high-standard warehouses in major metropolitan areas in China has medium and long-term structural opportunities. From the supply side, China's current high-standard warehouse stock is less than 60% of that in the United States, and the per capita high-standard warehouse area is less than 15% of that in the United States ; on the demand side, China's e-commerce sales are about 1.4 times that of the United States, and the cargo turnover is about 2.6 times that of the United States .

Benefiting from the huge scale of industry and consumption, strong logistics radiation capacity and strong leasing market fundamentals, first-tier cities and their surrounding areas are the preferred areas for logistics investment. CBRE expects that the capitalization rate of high-standard warehouses in first-tier cities will gradually decline after the second half of 2023 as leasing and investment demand recovers . Therefore, investors are advised to pay close attention to the rare window period brought about by the expansion of first-tier cities in the past two years, including land development, asset acquisition, and renovation opportunities of old facilities in the main urban areas, while actively paying attention to cities surrounding first-tier cities.

High-end warehouse rental index and average capitalization rate in first-tier cities