Lack of Land Pushing Up Cost of China Logistics Space

China may be moving toward multi-storey warehouses like Goodman’s Interlink in Hong Kong

An unwillingness by local governments to sell land for logistics use, and the rapid expansion of China’s ecommerce sector, are driving up the costs of warehouse space for users on the mainland according to real estate analysts, with rents in Beijing now reaching US$7 per square metre per year.

Quoting Peter Zhang, director of industrial consulting at Cushman & Wakefield in Shanghai, a report in today’s South China Morning Post points out,

Short supply drove up land prices for modern logistics properties by 20-30 per cent in some cases in the past two years in Shanghai, Zhang said, citing a plot for logistics use near Pudong International Airport that cost 1,500 yuan to 1,800 yuan per square metre last year, up from 1,050 yuan to 1,200 yuan three years ago.

For rents, logistics properties fetched an average of US$7 per square foot a year in Beijing, the most expensive on the mainland, compared with US$13.90 in Hong Kong, US$17.50 in Singapore and US$20.60 in Greater Tokyo in the third quarter, according to data from global consultancy CBRE.

The Post’s report found that only seven of the 214 land plots sold last year in Beijing were stated or indicated for logistics use. Local governments often prefer to grant land for commercial or industrial use, which generates more tax revenue, than for logistics purposes, which brings in relatively little investment, and creates minimal revenue for local coffers.

In response to the land scarcity, many logistics developers expect that mainland distribution centres will rapidly transition from single-storey structures to the multi-storey formats already popular in Hong Kong and Japan.