The rapid growth of the e-commerce sector in China has triggered demand for quality logistics space, with demand often outstripping supply, according to a recent market report from real estate service provider DTZ. China is set to overtake the United States as the largest e-commerce market in the world by 2015, but e-commerce companies will need to find ways to make more efficient deliveries to the more than 220 million online shoppers in China. Limited infrastructure, lack of warehouse space and the shortage of last-mile delivery expertise often makes it difficult for e-commerce companies to provide efficient services in lower-tier cities and inland areas. For investors and developers, the scarcity of suitable land is also an issue. Investors should consider investing in large companies with existing land banks, or in those that are redeveloping old facilities, the report said. The booming e-commerce market has also transformed the supply chain from being supply-driven to demand-led. This has important ramifications for logistics property in terms of site selection, specification and location. “We see a growing need for the development of small warehouses adjacent to the city markets,” said David Ji at DTZ. Modern logistics facilities account for just 2% of the total stock in China, meaning that the majority of property comprises middle- and low-end premises, mostly converted from factories and poorly constructed facilities, with inadequate height, insufficient loading docks and restricted vehicle accessibility. The lack of supply has also contributed to higher rentals in first tier markets, with logistics rents going up by 85% in some districts of Shanghai during the past year. The higher rentals have prompted many e-commerce companies to relocate their warehouses to lower cost regions, the DTZ report said. “Over 30 million new Chinese consumers — the equivalent of the population of Canada — are expected to make online purchases every year until 2015,” said Ji, as reported in the China Daily.
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