The View | Shanghai’s brutal lockdown a defining moment for China’s logistics sector
Botched handling of Shanghai’s lockdown shines spotlight on last-mile fulfilment facilities and same-day delivery, which need high-quality warehouses in urban centres
Fresh food has been key battleground in online grocery market, and lockdown disruption is fuelling demand for more sophisticated cold-storage facilities
Ever since the Covid-19 pandemic erupted, logistics real estate has been all the rage. Having accounted for just over 10 per cent of global commercial property transactions in 2016, industrial and logistics assets were responsible for 21 per cent of investment activity last year, and as much as 29 per cent in the Asia-Pacific region, data from CBRE shows.
Trends that were apparent long before the virus struck – the exponential growth of e-commerce, the adoption of technologies that help companies improve their efficiency, and structural shifts in asset allocation favouring logistics real estate – have become much more pronounced over the past two years.
The unprecedented disruption wrought by the pandemic pushed more consumers online, forcing companies to rethink their operations, particularly the management of their supply chains. The biggest challenge has been to increase the resilience of distribution networks, especially the final segment of a product’s journey from manufacturer to end consumer, or “last mile”, in urban centres.
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How Covid shut down Shanghai
How Covid shut down Shanghai
While retailers and logistics providers the world over have had to quickly find new ways to get goods to their destinations within ever tighter time frames, nowhere has last-mile delivery been under more scrutiny this year than in China.
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Beijing’s determination to maintain its zero-Covid policy, which includes draconian lockdowns to crush even the smallest of outbreaks, is testing the resilience of last-mile logistics in ways that were unthinkable only a few months ago.
The protracted lockdown of Shanghai, China’s financial and commercial hub, has confined most of the city’s 25 million residents to their homes for weeks and, more worryingly, upended grocery delivery operations, making it difficult for many residents to obtain food and other daily necessities, and even forcing some to resort to bartering.
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Not only has this come as a shock to a country that is at the cutting edge of e-commerce, with the world’s highest online retail penetration rate, but it has also accentuated the scale and severity of the disruption caused by the government’s increasingly contentious zero-tolerance approach to the virus.
A report published by Nomura on April 11 noted that 40.3 per cent of China’s gross domestic product is currently under full or partial lockdown, roughly twice the share at the beginning of this month.
