Q2 2020 Market Report Industrial The logistics sector on apath is of recovery

knightfrank.com.cn SHANGHAI INDUSTRIAL MARKET REPORT Q2 2020

THE LOGISTICS SECTOR IS ON A PATH OF RECOVERY

In Q2,Shanghai industrial market recovered due to the continuous release of market demand. The ’s manufacturing Purchasing Managers Index (PMI) in June reached 50.9%, up 0.3 percentage point compared with the previous month, which has remained above 50% for four consecutive months.

OVERVIEW AND OUTLOOK

According to the Shanghai Municipal Driven by a batch of key investment In the second half of 2020, it is expected Statistics Bureau, GDP in Shanghai projects, Shanghai’s manufacturing that the market will see steady growth with decreased by 2.6% YoY to RMB1,735.68 investment increased by 20.1% YoY. In the an estimated logistics warehouse space of billion in the first half of 2020, with the first half of 2020, the industrial production more than 255,000 sqm to be completed, decline rate decreasing 4.1 percentage recovered rapidly with the gross industrial while the vacancy rate will climb up in a points compared to Q1 2020. In Q2, output value of strategic emerging short term. In terms of leasing, landlords Shanghai’s industrial production achieved industries in Shanghai increased by 5.5% are expected to remain cautious due to the monthly growth for three consecutive YoY to RMB597.618 billion, showing a clear COVID-19. The logistics warehouse rent is months and the cumulative decline growth momentum. expected to increase steadily in the next six narrowed month by month. The gross months. industrial output value of large-scale In the first half of 2020, realised foreign industrial enterprises in Shanghai dropped direct investment (FDI) achieved US$10.282 by 6.3% YoY to RMB1,501.475 billion, a billion, an increase of 5.4% YoY, rising by decrease of 11.1 percentage points QoQ. 0.9 percentage point compared with Q1. Amongst, the gross industrial output value The FDI of tertiary industry increased by increased by 5.9% YoY to RMB318.091 13.2%, accounting for 95.3% of the total in billion in June. Shanghai.

2 SHANGHAI INDUSTRIAL MARKET REPORT Q2 2020

Figure 1 : Shanghai industrial market indicators [1]

New supply of Rent of logistics Vacancy rate of FACTORY RENT logistics warehouse warehouse logistics warehouse

Q2 2020 256,287 sqm RMB 1.58 / sqm / day 12.0% RMB 1.3/ sqm / day

QoQ Change - 1.9% 1.0 pps

Outlook (Q3 2020)

Source: Knight Frank Research [1]Rent refers to tax-included contract rent,including bonded and non-bonded warehouses

Figure 2 : Future supply of logistics warehouse in Shanghai

sqm Baoshan 1,000,000

800,000 Qingpu

Songjiang

600,000 Fengxian

Jinshan

400,000

200,000

0

2020 2021 2022

Source: Knight Frank Research

LOGISTICS PROPERTIES In June, the Logistics Industry point from the previous month. China’s with the average rent increased by 1.9% Sentiment Index continued to maintain Warehouse Storage Index reached QoQ to RMB1.58 per sqm per day. The a steady upward trend. In June 50.7%, up 0.3 percentage point from the rent in bonded warehouses remained 2020, the China’s Logistics Industry previous month. stable at RMB1.4 per sqm per day Sentiment Index, released by the China while that in non-bonded warehouses Logistics and Purchasing Federation, In Q2, Shanghai’s logistics warehouse increased by 3% QoQ to RMB1.65 per reached 54.9%, up 0.1 percentage market showed a significant recovery sqm per day.

3 SHANGHAI INDUSTRIAL MARKET REPORT Q2 2020

In Q2, the total stock of Shanghai logistics warehouse market rose to 7.62 Figure 3 :Average and QoQ growth rate of logistics warehouse properties in Shanghai million sqm while the one of bonded warehouses reached over 2.15 million RMB/sqm/day Logistics rent (left) QoQ growth rate (right) growth rate % sqm. Nearly 97% of the total area of 1.8 5% bonded warehouses is concentrated 1.6 in Pudong, of which 50% is located in 4% Pudong Lingang. 1.4 3% 1.2 2% On the supply side, three new projects 1.0 were completed in Shanghai, bringing 0.8 1% approximately 256,000 sqm of new 0.6 0% supply to the market. Of which two 0.4 -1% are located in Pudong, namely the 0.2 Mapletree Ouluo Logistics Park Phase 0.0 -2% Two in Pudong Airport and United D Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2 2013 2014 2015 2016 2017 2018 2019 2020 Warehouse Phase V in Pudong Lingang.

Due to the new supply, the vacancy Source: Knight Frank Research rate in Shanghai increased slightly by 1 percentage point from the previous operators maintained steady growth. as well. A cosmetics company renewed quarter to 12%. The tenant from cold chain sector the lease of a 20,000 sqm-warehouse leased 12,000 sqm in Blogis Songjiang space in Ping’an Shanghai Fengxian In Q2, affected by the epidemic, the in Q2. Besides, the leasing demand from Logistics Park. storage demand from cold chain daily necessities sector increased in Q2

FACTORIES In Q2, Shanghai’s industrial factory rents remained stable with the average Figure 4: Average rent and QoQ growth rate of single-floor factories rent of single-storey factories remained unchanged at RMB1.3 per sqm per day. RMB/sqm/day Factory rent (left) QoQ growth rate (right) growth rate % 1.4 8% Liando U Valley Shanghai Baoshan 7% 1.2 International Enterprise Harbour has 6% one stand-alone factory for either lease 1.0 5% or sell on separate floors, with a leasable 4% 0.8 area between 2,400 and 8,000 sqm 3% 2% and an asking rent of RMB0.75-1.4 per 0.6 1% sqm per day. Besides, Liando U Valley 0.4 0% Shanghai Minhang Maqiao Artificial -1% Intelligence Park is expected to be 0.2 -2% completed in Q4 2020 with a leasable 0.0 -3% area of 2,400-7,700 sqm. Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2Q3Q4Q1 Q2 2013 2014 2015 2016 2017 2018 2019 2020

The recent favorable policies have Source: Knight Frank Research been implemented to accelerate the development of new energy vehicles On 30 June, the new factory of GTA sqm, which will further help Shanghai (NEV) sector. On 27 May, the second Semiconductor in Lingang was build into an integrated circuit industry phase of Tesla Gigafactory in Shanghai officially put into operation. With a highland after it has commenced Lingang Industry Area is about to be total investment of RMB35.9 billion, the operation. capped and will be used to produce project covers a land area of 230,000 Model Y models after completion.

4 SHANGHAI INDUSTRIAL MARKET REPORT Q2 2020

SALES AND INVESTMENT On 21 April, LOGOS, Ivanhoe Cambridge covering greater Beijing, Shanghai, that it set up a joint venture to invest and Bouwinvest announced they have Guangzhou and core markets in the in logistics facilities across China. The completed a first close to establish a new mid-west of China, with the total cooperation project includes the high- logistics development venture in China amount of over US$800 million. quality developed logistics warehouses with a GCC-based (Gulf Cooperation operated by NE China with a total Council) investor for the development On 6 May, NE China, a logistics facility amount of US$600 million, focusing on of high-quality logistics and industrial investment developer, together with JP cities including Shanghai, Nanjing and facilities in the key logistics markets Morgan Asset Management, announced .

LAND MARKET After the COVID-19 epidemic, land transactions in Shanghai have Figure 5 :Transacted area of primary industrial land by distri ct, Q2 2020 accelerated. In Q2, the primary industrial land market in Shanghai 1% remained active with 36 industrial Jiading 3% plots sold, involving a total land area 5% Fengxian of 2.9 million sqm, almost four times 6% the number of transactions as wells as Baoshan seven times the number of transacted 7% Chongming area.

Songjiang 49% 7% In Q2, only one industrial plot was Pudong sold in Chongming , which was acquired by Hudong-Zhonghua Jinshan 8%

Shipbuilding (Group) Company Limited Minhang with a total transacted area of 1.42 Qingpu 14% million sqm. Chongming thus ranked first in terms of transaction area in Q2, as this land is the largest industrial plot Source:Shanghai Planning and Land Resources Bureau, Knight Frank Research sold in the first half of 2020, accounting for nearly 50% of the city’s total transaction area in Q2. Pudong ranked second with the total transacted area Figure 6 :Primary industrial land price by district, Q2 2020 of 400,000 sqm, accounting for 14% of million RMB/Mu the total. 2.5

In terms of sales price, Pudong District 2.0 recorded the highest average industrial land price in Q2, reaching RMB1.95 1.5 million per mu. Baoshan District secured the second place with a unit price of RMB1.13 million per mu. 1.0 Chongming’s land price was relatively low, recording RMB250,000 per mu. 0.5

0.0 Pudong Baoshan Qingpu Fengxian Minhang Songjiang Jiading Jinshan Chongming

Source: Shanghai Planning and Land Resource Bureau, Knight Frank Research

5 SHANGHAI INDUSTRIAL MARKET REPORT Q2 2020

SHANGHAI’S LOGISTICS WAREHOUSE RENTS BY DISTRICT

1.7 - 1.9 1.7 - 1.8 High 1.3 - 1.4

Baoshan R E N T Jiading

1.8 - 2.0 Low

Putuo 1.7 - 1.8 1.7 - 1.9 1.4 - 1.6 Qingpu 1.8 - 2.0 Pudong

1.5 - 1.7 Minhang

1.3 - 1.5 Songjiang 1.2 - 1.4 1.4 - 1.6 Pudong Lingang

Fengxian 1.3 - 1.4 Total Inventory

7.62 Jinshan million sqm

Source: Knight Frank Research Note: rents using tax-included contract rent at RMB/sqm/day; red refers to rents of bonded warehouses while black refers to rents of non-bonded warehouses

6 We like questions, if you’ve got one about our research, or would like some property advice, we would love to hear from you.

Research & Consultancy Shanghai Office Services

Regina Yang Ying Lee Timothy Chen Director, Head of Research & Consultancy, Managing Director, Shanghai Senior Director, Shanghai & Beijing +86 21 6032 1719 Head of Research & Consultancy, China +86 21 6032 1728 [email protected] +86 21 6032 1769 [email protected] [email protected]

Martin Wong Evan Xu Will Zhang Associate Director, Analyst, Research & Consultancy, Senior Director,Industrial& Logistics, Research & Consultancy, Shanghai China +852 2846 7184 +86 21 6032 1729 +86 21 6032 1788 [email protected] [email protected] [email protected]

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