Knight Frank Launches Industrial Market Report Q4 2017

Published on 2018-03-06

E-commerce and courier companies are looking at the cold chain logistics field
High-quality cold chain warehouse saw greater demand
Knight Frank expects the leasing demand for logistics and warehouse space to remain high levels, pushing up rents by 5-8%

Shanghai Industrial Market Report Q4 2017_Final-1Knight Frank launches Industrial Market Report Q4 2017, which pointed out that steady growth in the manufacturing sector continued to generate sustained demand for warehouse facilities by December 2017. According to Shanghai statistics bureau, in 2017 the gross industrial output value of large-sized industrial enterprises in Shanghai reached RMB3,398.9 billion, up 6.8% year on year (Y-o-Y). In this report, Knight Frank provides our analysis and opinions of the supply and demand situation and rental trends about the logistics properties and factories in Shanghai, and the industrial land market as well.

Logistics property

In December 2017, affected by seasonal factors, the China logistics industry sentiment index was 56.6%, down two percentage points from the previous month, but up 0.8 percentage point compared with June 2017. In general, the index remained at a high level.

Due to the Spring Festival holidays, logistics activity for food and daily commodities tends to be more active, which means logistics demand will be stable for the next one to two months.

Regina Yang, Director and Head of Research & Consultancy at Knight Frank Shanghai, says, “The rapid development of retail and e-commerce has driven up demand for industrial storage space. In Q4, Shanghai’s logistics warehouse rents increased steadily to RMB1.51 per sqm per day (see Figure 1), an increase of 4.1% quarter on quarter (Q-o-Q). The growth rate was 0.6 percentage point higher than that of the previous quarter.”

In Q4, boosted by the “Double 11” and “Double 12” Shopping Carnival sales promotions and strong demand for third- party logistics, high-standard warehouses have been sought after. Thus, the overall vacancy rate in high-end Shanghai logistics parks decreased one percentage point Q-o-Q to 10%. On 11 November, the warehouse delivery
of Jingdong Logistics increased by 134% Y-o-Y. The warehouse delivery for fresh food registered the most eye-catching growth at 236%, this was the first “Double 11” shopping carnival after the independence of Jingdong Logistics Group.

In Q4, there was no new warehouse supply among major logistics property developers. A 63,000-sqm warehouse space owned by CITIC Capital, situated in Hai Gang Town of Fengxian District, was added to the Grade-A warehouse market.


In Q4 2017, factory supply was suffcient. Newly completed factories were concentrated in Jinshan and Fengxian Districts. In the Jinshan Industrial Zone, located in Jinshan District, a total of 60,000 sqm of new factory space was completed, while a total of 80,000 sqm of new factory space was completed along Liang Gang Avenue in the Fengxian Lingang area.

Regina Yang, Director and Head of Research & Consultancy at Knight Frank Shanghai, says, “In Q4, factory rents in Shanghai continued
its upward trend. The average rent
for single-floor factory space reached
RMB1.16 per sqm per day (see Figure 2),
a Q-o-Q increase of 3.6%, 0.5 percentage point higher than that of the previous quarter. Demand for factories in Songjiang and Jinshan was very strong, with the average rent for their single-floor factories reaching RMB1.22 and RMB0.85 per sqm per day, respectively. ”

Sales And Investment

In the second half of 2017, GLP, the largest warehouse operator in Asia, announced that it had been acquired by a Chinese private equity consortium, comprising Vanke, Hopu, Hillhouse Capital Group, Bank of China Group and GLP’s chief executive officer, for about S$16 billion (US$11.6 billion). After GLP was delisted on 22 January 2018, the Vanke-Led Consortium became the single largest shareholder in GLP. This move will help Vanke perfect its deployment and speed up its development in the logistics and real estate sectors.

As pure delivery services can no longer meet the development needs, courier companies are seeking new “cross- border” opportunities as they are moving very quickly to expand their business size. In Q4, STO Express acquired an 86,000 sqm warehouse in Zhonggu Town in Qingpu District. The warehouse is situated with Ai Qi Harbor to the East, Zhong Da Road to the South and Zhao Zhong Road to the West.

CITIC Capital acquired a factory in Haigang Town, Fengxian District, with
a GFA of 63,000 sqm, from Shanghai Yasheng Logistics Co., Ltd through
an offshore indirect transfer. Yasheng Logistics is a logistics company in
which Agility Logistics invested. This acquisition indicates that CITIC Capital is taking further steps to enter the logistics property market.

Land Market

In Q4, the primary industrial land market
in Shanghai was active, with 16 industrial plots covering over 640,000 sqm of land area traded. Songjiang, Qingpu and Fengxian saw the most activity. Songjiang led the market in terms of traded land
area, reaching 259,000 sqm. The traded land areas of Qingpu and Fengxian were about the same, reaching 105,000 sqm and 104,000 sqm, respectively (see Figure 3).

In terms of sales price, the highest average industrial land price was still recorded in Minhang District in Q4 2017, reaching RMB1.44 million per mu. Pudong New Area ranked the second, with land prices reaching RMB1.165 million per mu. Jinshan, Fengxian and Jiading saw lower land prices, ranging from RMB0.5 to 0.55 million per mu.

In terms of transacted land size, most single land parcels sold were under five hectares, accounting for 75% of total transactions in Q4 2017. Single land parcels sized from 1 to 5 hectares contributed most, amounting to 56% of the total. Two land plots over 8 hectares were traded, located in Songjiang and Fengxian.

Frank Fang, Associate Director of Industrial Services at Knight Frank Shanghai, says, “In the coming year, we anticipate the leasing demand for logistics and warehouse space to remain high levels, pushing up rents by 5-8% over the year. In the logistics property market, online retailers, developers and financial institutions have been actively entering the market. Fierce competition is expected due to a shortage of high-quality warehouse and cold chain logistic facilities.”

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