The rise of e-commerce has been much welcomed by the property management market. In particular, the spectacular growth noted in the Chinese market has sparked many companies to announce investments to satisfy this growing demand. For example, in the past few months, Global Logistic Properties, Goodman Group and the Carlyle Group are among the several that have each announced plans to build warehouses.
Shanghai-based e-Shang is another such company which recently received a US$120m loan from Goldman Sach’s. Co-founded by private equity firm Warburg Pincus, e-Shang has already received over US$200m from Warburg and has plans to list on the stock exchange. The company has grown its portfolio of warehouses to the one million sq m of completed and ongoing projects. The company focuses on developing institutional-quality warehouses as well as providing logistics services across Shanghai, Beijing, Guangzhou as well as a number of second-tier cities.
Due to the lack of proper available warehousing, rents in the logistics space have grown at about a nationwide average of 5% to 10% a year in the past few years, as increasing demand outpaces supply, according to Colliers International Research.
According to Jones, Lang, LaSalle’s white paper, “Ecommerce in China: Online is the New Black”, the Chinese logistics market has traditionally been dominated by “low quality” warehouses with a “chronic” undersupply of modern facilities. Because of this as well as to spread their risks, e-commerce providers are spreading their leases among multiple developers. For many of these e-retailers that opt to lease as oppose to own warehouses, it is estimated that less than 5% of revenues tend to be invested in operations. Also, these larger e-retailers tend to prefer managing their warehouses on their own because of the importance of delivery speed and reliability for their customers.
One of the largest e-commerce providers in China, Jingdong, is an example of an e-retailer that manages its own warehouses via a logistics subsidiary because of the importance of delivery speed and reliability. According to the company, it has six major fulfilment centres and 75 warehouses in 31 cities, as well as more than 1,400 delivery stations and more than 300 pickup stations, covering 1,232 districts and counties nationwide. Because of its tight logistics control, with its more than 10,000 couriers, the company is able to provide customers delivery options such as Three-Hour Delivery, Night Delivery, and its “211 Program” to provide a variety of same-day delivery choices in 27 major cities and next-day delivery in more than 150 cities across China.As more modern warehouses are built across China, it is likely this logistics network will naturally link Tier 1 cities with Tier 2 cities and smaller cities thus improving the efficiency of delivery times as well as basic fulfilment services and perhaps even the offering of more value-added services. Warehousing rents may also moderate as more space becomes available.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)