New | E-commerce boom to drive up prices of warehouses, logistic properties: analysts

Undersupply of land and demand from booming e-commerce will steadily drive up the cost of logistics properties on the mainland, pushing warehouses to cheaper locations in the next few years, industry analysts say.

The logistics industry is being promoted as a key plank of the economy under the central government's plans to make trade more efficient. But local governments are wary of turning over land for logistics use, as warehouses are cheaper to build, employ relatively few people and companies often do not pay taxes based on where their goods are stored.

"Relocation costs are rising, further limiting land supply for logistics use," said Peter Zhang, director of industrial consulting at Cushman & Wakefield in Shanghai. "On the demand side, a strong e-commerce market is fuelling demand for distribution centres."

In Beijing, only seven of the 214 land plots sold last year were stated or indicated for logistics use, the South China Morning Post has found.

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.

Zhang predicted logistics rents on the mainland would increase by more than 10 per cent a year in the more competitive areas such as Beijing and Shanghai, but vast underdeveloped land tracts would keep general prices elsewhere in check.