Shanghai-based industrial developer New Ease has set up a joint venture with JP Morgan Asset Management to invest in logistics facilities across China, marking the latest in more than $4 billion in China warehouse deals announced over the past five weeks, as institutional investors pile into the sector.
New Ease said in a statement today that the joint venture has been seeded with a $600 million portfolio of stabilised logistics facilities the firm has developed in Shanghai and the nearby cities of Nanjing and Suzhou in Jiangsu province.
The announcement comes just over four months after New Ease set up a JV with UK-based fund manager Actis to invest an initial $200 million to develop logistics facilities in China.
New Ease representatives declined to reveal the financial details of the JV or the size of the portfolio.
Banking on a Tested Formula
The two year old company, which is chaired by ESR co-founder Sun Dongping and backed by a growing number of institutional investors, has built out a portfolio in China that totals over four million square metres (43 million square feet) of logistics assets in operation and under development across China.
“We are very excited to partner with JP Morgan Asset Management, which has deep experience in the global real estate investment field,” said Sun.
The new partnership follows ESR’s HK$14 billion listing on the Hong Kong stock exchange last October and comes as demand for warehouse space has remained resilient throughout the coronavirus epidemic as a result of a surge in online shopping.
The dependence of online shopping during lockdowns put in place due to COVID-19 has protected the logistics sector from the disruption seen in other real estate segments.
The country’s e-commerce industry expanded by nearly 18 percent last year to reach $867.6 billion in transactions, according to numbers from economic data provider Statista, which also predicted that online shopping will grow by an additional 33 percent by 2024.
Sun said that, despite the interruptions caused by COVID-19 in the country, tenant demand for “quality logistic facilities remains robust – and perhaps has even strengthened – as consumers increasingly shift to e-commerce”.
Online Grocery Thrives Amid Lockdown
With China’s shoppers staying at home much of this year due to social distancing guidance, the move away from traditional retail to e-commerce has been accelerated, according to a JLL report on mainland China’s real estate market released last month.
The property consultancy said that demand for warehouse space has not weakened, with the country’s fresh food e-commerce sector in particular – which delivers groceries to customers’ doorsteps – booming as a result of increased demand.
Online fresh food suppliers JD Fresh and Dingdong Maicai reported an increase of over 200 percent in daily users during the spring festival period compared with the year before, according to JLL.
Making Space for Upgrades
The JV between JP Morgan and New Ease also comes as China faces an undersupply of institutional grade logistics facilities, with many tenants in existing locations looking to upgrade to state-of-the-art properties.
David Chen, CIO for Asia Pacific real estate at JP Asset Management’s alternative investment arm JP Morgan Global Alternatives, described the joint venture with New Ease as a “long-term industrial partnership” which is “well-positioned to capitalize on China’s supply shortage of high quality industrial property given current and future tenant demand levels”.
Other players such as Baring Private Equity Real Estate Asia are betting on this same mismatch in supply and demand in China.
Just two days ago, the Hong Kong-based private equity firm announced it had closed a $480 million commitment to a mainland China logistics joint venture, with the firm noting that an increasing number of tenants are seeking to upgrade to institutional grade facilities from what are known as substandard “farmer grade” warehouses in China.
Racing into China Logistics
JP Morgan Asset Management’s deal with New Ease is the latest in a flurry of investments in China logistics that have resulted in ventures worth more than $4 billion over the past five weeks.
Two weeks ago, Logos Group reached a first close on its fourth China logistics venture, teaming up with Canada’s Ivanhoé Cambridge, Dutch property fund manager Bouwinvest and an undisclosed investor from an Arab state to raise $800 million for warehouse developments across the country.
In the same week, Asia’s biggest warehouse player, GLP announced it had reached a final close for GLP China Income Fund I (GLP CIF I) — a new China-focused fund with a total investment capacity of RMB 15 billion ($2.1 billion) in assets under management.
Just eight days before that announcement, LaSalle Investment Management said that it had raised $681 million for a China warehouse development and management fund dubbed LaSalle China Logistics Venture (LCLV).