COLLIERS RADAR LOGISTICS | INDUSTRIAL SERVICES | SOUTH CHINA | 29 MAY 2020 Rosanna Tang Head of Research | Hong Kong SAR and Southern China +852 2822 0514 [email protected] Jay Zhong Senior Analyst | Research | Guangzhou +86 20 3819 3851 [email protected] Yifan Yu Assistant Manager | Research | Shenzhen +86 755 8825 8668 [email protected] Justin Yi Senior Analyst | Research | Shenzhen +86 755 8825 8600 [email protected] GREATER BAY AREA LOGISTICS MARKETS AND OPPORTUNITIES COLLIERS RADAR LOGISTICS | INDUSTRIAL SERVICES | SOUTH CHINA | 29 MAY 2020 TABLE OF CONTENTS Page INSIGHTS AND RECOMMENDATIONS 3 MAP OF GBA LOGISTICS MARKETS AND RECOMMENDED CITIES 4 MAP OF GBA TRANSPORTATION SYSTEM 5 LOGISTICS INDUSTRY SUPPLY AND DEMAND 6 NEW GROWTH POTENTIAL AREA IN GBA LOGISTICS 7 GBA LOGISTICS CLUSTER – ZHUHAI-ZHONGSHAN-JIANGMEN 8 GBA LOGISTICS CLUSTER – SHENZHEN-DONGGUAN-HUIZHOU 10 GBA LOGISTICS CLUSTER – GUANGZHOU-FOSHAN-ZHAOQING 12 2 COLLIERS RADAR LOGISTICS | INDUSTRIAL SERVICES | SOUTH CHINA | 29 MAY 2020 Insights & Recommendations RECOMMENDED CITIES This report identifies three logistics Zhuhai Zhongshan Jiangmen clusters from the mainland Greater Bay The Hong Kong-Zhuhai-Macau We expect Zhongshan will be The manufacturing sector is Area (GBA)* cities and among these Bridge Zhuhai strengthens the a logistics hub with the now the largest contributor clusters highlights five recommended marine and logistics completion of the Shenzhen- to Jiangmen’s overall GDP. logistics cities for occupiers and investors. integration with Hong Kong Zhongshan Bridge, planned The government aims to build the city into a coastal logistics Zhuhai-Zhongshan-Jiangmen: and Macau. for 2024, connecting the east and west banks of the Peral center and West Guangdong’s > Zhuhai-Zhongshan-Jiangmen’s existing River. key logistics hub. Grade A warehouse stock is relatively low compared to other clusters, yet Huizhou Zhaoqing the new supply is planned to double in next three years, providing more new Huizhou’s industrial economy and proximity Located in the central-west part of logistics facilities with competitive rent to Shenzhen established itself as one of the Guangdong, Zhaoqing acts as a gateway major logistics centers in the GBA. Its lower connecting the Great Bay Area (GBA) to amid rapid economic growth in the rent and labor cost also promoted itself as a China’s south-west region and an organic local markets. promising alternative to other cities. produce transaction hub for the GBA. Shenzhen-Dongguan-Huizhou: From 2014 to 2018, the compound growth rate of freight turnover reached about 20% in the Greater > The limited logistics land and future Bay Area mainland cities (GBA)*, reflecting the robust expansion and hence demand for the logistics supply, coupled with the relative high sector1. In 2018, the Gross Domestic Product (GDP) of transport, warehousing, and postal service in the occupancy costs of Grade A GBA recorded almost USD50 billion. We believe that under the blueprint of future development and warehouses in Shenzhen created industrial expansion in the GBA, property demand for logistics sectors should further expand spillover demand, accelerating the throughout the development phase over the next decade. warehouse development of Since the announcement of the GBA development plan in February 2019, the logistics sector have been neighboring emerging cities, especially receiving increasing interests from both domestic and foreign investors and businesses who aim to Huizhou. capture the GBA opportunities. In fact, according to the recently published Colliers report Hong Kong Investor Survey 2019, the logistics sector is regarded as the most attractive asset type among the GBA Guangzhou-Foshan-Zhaoqing: mainland cities, with 38% of the Hong-Kong based investors indicated as their investment priority. > Guangzhou, the most populous city in As of Q1 2020, there are 7.7 million sq meters (83.3 million sq feet) of existing Grade A logistics Guangdong, has a strong economic facilities in the GBA, and the total stock is expected to increase by 32% to 10.2 million sq meters (109.8 connection with Foshan. The urban million sq feet) in the next three years (by 2022), which could still be lagging the expected 60% growth integration of these two cities has of e-commerce2 during the same period. benefitted the logistics development of Source: 1 Guangdong Statistical Yearbook, 2 Assuming the same 16.5% YOY China’s e-commerce growth rate (2019) to for the next three years. *Note: The GBA in this report only refer to the nine mainland cities in the Greater Bay Area, excluding the Hong Kong Special Administrative Region the emerging market in Zhaoqing. and Macau Special Administrative Region of the People’s Republic of China. 3 COLLIERS RADAR LOGISTICS | INDUSTRIAL SERVICES | SOUTH CHINA | 29 MAY 2020 MAP OF GBA LOGISTICS MARKETS AND RECOMMENDED CITIES Zhaoqing* Foshan Guangzhou * Recommended Cities Rent (RMB/ sqm/ day) 0.73 Rent (RMB/ sqm/ day) 1.02 Rent (RMB/ sqm/ day) 1.25 Stock (sqm) 175,300 Stock (sqm) 1,971,200 Stock (sqm) 1,897,700 New Supply (sqm) 94,000 New Supply(sqm) 365,500 New Supply(sqm) 591,500 Huizhou* Rent (RMB/ sqm/ day) 1.14 Stock (sqm) 803,200 Zhaoqing * New Supply (sqm) 197,200 Guangzhou Zhongshan* Dongguan Huizhou * Rent (RMB/ sqm/ day) 1.17 Foshan Rent (RMB/ sqm/ day) 1.3 Stock (sqm) Stock (sqm) 162,000 Dongguan 1,615,400 New Supply (sqm) New Supply (sqm) 180,000 953,900 Shenzhen Shenzhen Jiangmen* Zhongshan * Rent (RMB/ sqm/ day) 1.51 Rent (RMB/ sqm/ day) 0.89 Jiangmen * Stock (sqm) 990,900 Stock (sqm) 126,800 Zhuhai * New Supply (sqm) 109,000 New Supply (sqm) 207,800 Zhuhai* New Supply (sqm) 94,000 Grade A warehouse criteria: Zoning: Fire-proof Level: Ceiling height: Bearing capacity: Raised platform: Structure: Industrial, Warehouse Applicable to C2 goods over 9 m 3 tons / sq m 7m width, 1.3m height Steel 4 *Recommended city. Note: rent and stock as of Q1 2020. New Supply is from 2020Q2 to 2022. Rent is net effective rent, not including tax. 1 sq metre = 10.76 sq feet. USD1 to RMB7.09 as of May 13 2020 COLLIERS RADAR LOGISTICS | INDUSTRIAL SERVICES | SOUTH CHINA | 29 MAY 2020 MAP OF GBA TRANSPORTATION SYSTEM Nansha Port under expansion Xinsha Port under expansion Airport Railway under construction 1 Nansha Port Freight Railway Zhaoqing S16 Guangzhou Northeast Freight 2 Guangzhou Railway Expressway under construction 2 Huizhou S26 Zhongshan-Kaiping Expressway S18 Foshan Guangzhou-Zhongshan-Jiangmen S20 Expressway Dongguan S45 S6 S45 Foshan-Jiangmen Expressway 1 Foshan-Qingyuan- S16 Conghua Expressway S86 S20 G25 Shenzhen S18 Huadu-Dongguan Expressway Jiangmen Zhongshan S26 S6 Heyuan-Dongguan-Huizhou Expressway S86 Shenzhen Outer Beltway Zhuhai G25 Shenzhen-Zhongshan Bridge Note: S: Province expressway G: National expressway Source: Colliers International, Guangdong’s Major Projects in 2019 5 COLLIERS RADAR LOGISTICS | INDUSTRIAL SERVICES | SOUTH CHINA | 29 MAY 2020 LOGISTICS SUPPLY AND DEMAND Expressway and highway density in nine mainland GBA cites in 2018 meters per sq kilometer meters per sq kilometer Better connectivity with the growth of transportation 250 2,500 Transportation system is one of the key elements influencing logistics sectors, which has also been emphasized in the GBA Outline Development Plan. The 200 2,000 GBA has implemented different measures to provide the hardware to improve the connectivity within the region and strengthen the supply chain. 150 1,500 In the GBA three-year action plan1, the government aims to build up the 100 1,000 expressway network over 5,000 kilometers (3,107 miles) by 2020, which is to compare to the 3,700 kilometers (2,299 miles) at the end of 20172. Eight expressways are under construction to enhance the connectivity within the 50 500 GBA cities3. The government is also working on the GBA Railway Network Planning (2018-2035) to improve the railway system. Meanwhile, the GBA 0 0 plans to reach 62 million TEUs of annual container throughput by 2020, which is to compare with the 54 million recorded in 20184. Supply-and-demand dynamics Expressway Density (LHS) Highway Density (RHS) Considering the logistic market in the GBA continues to expand along with the Source: Colliers International, Guangdong’s Major Projects in 2019, The statistics bureau of the relevant GBA cities region’s development, an adequate land supply for warehouses is essential to “Tmall Double 11 Promotion Day” , 2009-2019 provide the hardware for the growth. By 2022, there are about 2.5 million sq meters (26.5 million sq feet) of new supply planned for the GBA market, RMB100 Million Piece 100 Million increasing 32% from current stock of 7.7 million sq meters (83.3 million sq 3,000 14 feet). On the demand side, e-commerce has been the primary user of logistics 12 warehouse, their market scale has grown substantially for the last decade, 2,500 10 exemplified by the “Tmall Double 11 Promotion Day”, which recorded a 26.3% 2,000 CAGR* for its sales between 2017-19. The quarantine in Q1 2020 also 8 1,500 stimulated the development of E-commerce live streaming, over 4 million 6 sessions in Q1. SF Express, the second largest courier in China also benefited 1,000 4 from E-commerce, increased 39%5 YOY in revenue in Q1, showing the great demand of logistics market. 500 2 In 2019, China’s online retail sales went up 16.5% YOY6 to RMB10.6 trillion 0 0 (USD1.5 trillion).We believe if China’s e-commerce economy can maintain the 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 same growth rate for the next three years, its market transaction volume Double 11 Sales Volume (LHS) Double 11 Package Volume (RHS) could grow by another 60% by 2022, which should surpass the new supply Source: Colliers International, Alibaba growth (32%) during the same period, generating substantial and solid Source: 1 GBA three-year action plan 2,4 Guangdong Statistical Yearbook3, Guangdong Province Major Projects 2019 demand for the GBA logistics facilities.