China’s logistics market set for post Covid-19 boom

As China’s economy begins to reopen after months of restrictions, logistics facilities and warehouses are in high demand, with the crisis accelerating growth in what was already the world’s largest e-commerce market.

During widespread lockdowns due to the COVID-19 pandemic, consumers flocked online to buy goods.

Online food delivery and grocery services saw a 400 percent growth in sales in February during the most acute stage of China’s lockdown.

The surge in consumer demand pushed up companies’ need for warehouse space in locations that could help expedite deliveries.

“The prominent role that delivery services played during the COVID-19 pandemic has highlighted their value and convenience to consumers,” says Richard Huang, head of supply chain and logistics service, JLL China. “We can expect this sector to grow, with more warehouses required to house fresh food.”

Medical supplies and pharmaceuticals is another fast-growing market that will impact warehouse demand, he says.

LaSalle Investment Management revealed that US$681 million from international investors has been committed to its first wholly China logistics fund in April.

And, despite investing heavily in land to develop their own warehouses, e-commerce giants such as Alibaba and JD.com are unlikely to fulfil their warehousing needs in the interim period due to the sheer size of China’s sales and delivery volumes, says Huang.

“We expect a period of gradual change in which big e-commerce players retain and even add to leased space while also building up their own networks,” he says. “This is especially true in the biggest city clusters, where city and regional plans to climb the value chain make it more difficult for the giants to acquire their own industrial land parcels.

Investors are specifically looking for “Grade A warehouse assets whose location and specifications permit efficient distribution to end consumers”, he says.