Market Insights Market Insights

    Issue 015: 8 August 2012

    China's Three Brightest Industrial Property Markets

    This week, we turn our focus to China's industrial property sector.

    Despite the mainland's widely predicted slowdown in economic growth, some bright spots stand out for their expected continued growth and good long-term prospects.

    In particular, Beijing, Guangzhou and Shanghai offer compelling opportunities, with robust growth and strong demand – both from domestic and foreign sources – keeping prices growing. Investors and industrialists would do well to investigate these markets closely.

    BEIJING: Although the Chinese economy is expect to slow, Beijing's industrial market is expected to stay strong from now till June 2013. With the leasing market propped up by demand from various domestic and foreign players, including B2C, 3PL and retailers, average rent is expected to grow moderately by about 4%.

    Meanwhile, land and capital values will inch up 2% to 3%, with the government and domestic entities remaining the strongest demand driver for the land market, making acquisitions mainly for their own use.

    On the supply side, about 2 million sq ft of industrial space was added recently, coming from Goodman Beijing Airport Logistics Centre (320,614 sq ft), GPL Park Beijing Capital Airport (0.32 million sq ft) and GPL City Park Daxing (1.02 million sq ft).

    GUANGZHOU: Like Beijing, Guangzhou is expected to stay strong despite the expected slowdown in China's economy. Demand for both warehouse and factory space remained high, bolstered by several domestic sectors, including FMCG, medical, electronics and materials. Meanwhile, high-specification logistics space remain in high demand due to tight supply.

    Robust demand and rising domestic consumption also prompted local firms to seek and buy ready-made industrial space in the city, with 12 out of 15 industrial land plots acquired by domestic industrialists. Foreign or multinational institutions were also active, snapping up 2.66 million sq ft of land in 2012 as follows: Proctor & Gamble Guangzhou (2.16 million sq ft), Yakult Guangzhou Co. Ltd (0.36 million sq ft) and Vejesto Electric (0.14 million sq ft).

    On the back of these factors, Guangzhou's industrial property sector will likely see moderate growth in rental and capital values of between 2.6% and 4.2% from now till mid-2013. Land values, however, are expected to hold steady with positive upsides of 0.4%.

    SHANGHAI: As the city climbs up the manufacturing value chain – a result of its move from traditional manufacturing to high-value, high-technology, research & development as well as pharmaceutical activities – traditional low-tech logistics spaces will be passed over in favour of high-specification factories and warehouses. As such, older, less sophisticated space is expected to be withdrawn for refurbishment or redevelopment in order to meet market needs.

    And in combination with a lack of upcoming supply, this will result in a tightening in vacancy, prompting land, capital and rental values to increase by as much as 6% in the next ten months or so.

    Shanghai's prospects for the mid- and long-term are also promising, as it is likely to enjoy strong demand from domestic and foreign firms on the back of plans by the local government to achieve annual economic growth of 8% or more.

    The data presented in this issue of Market Insights was drawn from published reports by Colliers International.
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