The industrial property market in Shanghai is expected to continue to expand this year, thanks largely to growth in the logistics sector, according to Colliers International Shanghai. There has also been an increased demand for warehousing of an international standard as a result of market reforms and investment growth. However, there is a shortage of supply. According to Jeremy Chapman, industrial director at Colliers International, the shortage of quality warehouse space is largely the result of 'an unwillingness to pay higher rentals for good facilities with large, efficient capacity storage'. Businesses would rather go for low-quality warehousing at 20 per cent to 30 per cent lower rents, he said. 'Companies are left with no choice but to accept what is available in the market or build their own facilities.' Colliers said mainland logistics providers and manufacturers were not open to the idea of long-term leases and typically were unable to plan more than a year or two in advance. Meanwhile, many companies are preparing to benefit from economies of scale introduced by the government. 'One of the most challenging aspects of supply-chain management is real estate,' Mr Chapman said. 'International developers are well aware of this, and forecast demand will remain high while rentals will continue to increase. Speculation has gained momentum because investors are beginning to respond to state-led projects with large amounts of government investment in infrastructure.' Rents for low-grade warehouses are about 0.5 yuan to 0.8 yuan per square metre per day, while quality modern warehouses go for about 0.9 yuan per sq m per day or more. Colliers predicts a gradual marginalisation of traditional warehousing as international standards become essential. 'Searching for warehouse space will increasingly focus on cost per cubic metre and palette rate,' Mr Chapman said.