Logistics real estate is gradually coming into the public view.
In mid February, ESR, the largest real estate management company in the Asia Pacific region, completed an acquisition of logistics and industrial asset portfolio with a total area of more than 550000 square meters in East China, which is the largest logistics and industrial asset portfolio transaction in East China so far.
Since its listing and trading on June 21, 2021, the first batch of public offering REITs of warehousing and logistics has increased significantly compared with the subscription price. Some institutions expect that its attraction to investors will continue in 2022.
However, the structural problems exposed by logistics real estate are becoming more and more obvious.
Block trading volume increased by up to 50%
The transaction volume and demand of logistics real estate increased significantly in 2021. According to Jones Lang LaSalle, the volume of bulk transactions of logistics real estate increased by more than 50% in 2021.
Zhang Yuhua, managing director of COSCO capital, said: "China's high standard logistics park is roughly 80 million square meters (completed) and is expected to grow to about 100 million square meters by the end of 2022. The stock of China's overall logistics real estate market is 1.06 billion square meters, including the area of all old logistics parks at the high-end, middle-end and low-end."
"In the Yangtze River Delta, a local wind vane market, the volume of high-standard logistics parks does not exceed 35%. Among them, Shanghai accounts for 25%, indicating that the stability of logistics facility investment in the Yangtze River Delta has attracted many logistics investors."
China's Cushman & Wakefield inventory area increased from 33 million 180 thousand square metres at the end of 2017 to 64 million square meters at the end of 2020, and the annual compound speed increased to 24%, according to DTZ. By the end of 2020, the proportion of high standard inventory areas in East China, North China, South China, southwest and central China was 41%, 22%, 14%, 14% and 9% respectively.
Jones Lang LaSalle believes that since the outbreak of the epidemic, logistics warehousing has become the most resilient real estate sector. The overall return on investment of logistics real estate in China's first tier cities is between 6% - 8%, higher than 4% - 6% of shopping centers and 2% - 3% of long-term rental apartments, and shows strong resilience and anti risk ability under the influence of the epidemic. Over the past five years (2016-2020), the compound annual growth rate of rent in Shanghai's high-quality logistics warehousing market has reached 5.8%, and the vacancy rate of high-quality logistics park is only 9.1%.
Capital inflow
With policy support, capital has also poured into the logistics real estate sector.
On April 30, 2020, the China Securities Regulatory Commission and the national development and Reform Commission jointly issued the notice on promoting the pilot work of real estate investment trusts (REITs) in the field of infrastructure, and China's infrastructure public offering REITs officially set sail.
On June 21, 2021, China's first nine infrastructure pilot REITs were listed on the Shanghai and Shenzhen exchanges, and China's public offering REITs officially landed. According to the division of underlying assets, CICC Poulos REIT and laterite Shenzhen Yan Tian Port Holdings Co.Ltd(000088) REIT in the first batch of pilot REITs belong to warehousing and logistics, and the final subscription prices are 3.89 yuan and 2.3 yuan respectively.
As of January 18, 2022, according to Jones Lang LaSalle, laterite Shenzhen Yan Tian Port Holdings Co.Ltd(000088) REIT has increased by 42.9% compared with the subscription price, and prosper REIT has increased by 29.3% compared with the subscription price. It is expected that it will continue to be favored by investors in 2022.
Zhang Yu, an analyst at China International Capital Corporation Limited(601995) , said: "according to preliminary statistics, the asset scale of major warehouse logistics development operators and logistics and e-commerce enterprises that have the potential to supply China's REITs market may reach 100 billion, which can form a certain reference for the pricing of the rate of return in the secondary market. Further consider the growth of operating cash flow (over the past 10 years, the average increase in the square meter rent of high-standard warehouse receipts has been 4% - 6%). The comprehensive rate of return of China's warehousing and logistics REITs, including potential asset appreciation income, may be close to the double-digit level and attractive. In the long run, we judge that the reasonable asset stock of China's warehousing and logistics has at least double the current growth space, and with the participation of more high-quality enterprises and fund managers, we believe that the future expansion of China's warehousing REITs will be a long-term high-quality sub race in China's REITs sector. "
Structural imbalance
According to the statistics of China International Capital Corporation Limited(601995) , although China's overall storage area is abundant (about 1 billion square meters), the inventory of modern storage and logistics facilities accounts for less than 7%, which is significantly lower than that of developed countries, and the supply level among regions is very unbalanced.
Zhang Yuhua said: "at present, thanks to the development of new urbanization, consumption upgrading and advanced manufacturing industry, the demand for logistics warehousing in China is growing rapidly, and high-standard warehouses show a large demand gap."
China International Capital Corporation Limited(601995) the report shows that China's warehousing and logistics market was established under the guidance of foreign-funded enterprises in the early stage, and is still in the pattern dominated by foreign capital, which is directly related to the fact that Chinese developers have less business involvement outside the residential and commercial areas in the past 20 years.
Compared with other countries, China's high-standard library area accounts for a relatively low proportion, and the overall supply is still insufficient.
China International Capital Corporation Limited(601995) the report points out that in terms of subregions, the supply of high-standard reservoirs in South China is in short supply, and the short-term supply in Southwest China is surplus. From 2018 to 2020, the volume and price of high-standard stock in South China rose simultaneously, while the vacancy rate remained at a low level (4.6%); While the volume of high-standard libraries in the southwest region increased and the price fell. The vacancy rate was as high as 26% at the end of 2020, reflecting the different supply and demand patterns of the two places. In the future, the supply of storage land in South China will be scarce and the demand will be strong. The southwest region will face a large number of new supply, and the supply will still be surplus in the short term.
In terms of cities, the first tier cities and their surrounding satellite cities have high-level library city scenes. In the first half of 2020, the rental rate (average 96%) and net effective rent (average 41 yuan / m2 / month) of high-standard libraries in first tier cities such as Beijing and Shenzhen and first tier satellite cities such as Dongguan, Langfang, Kunshan, Suzhou and Huizhou were higher than the average level of major logistics center cities in the mainland (rental rate 86%, average rent 33 yuan / m2 / month), while Dalian, Changchun, Shenyang, Harbin, Kunming Chongqing, Chengdu and other markets in the northeast and southwest regions are relatively weak (the rental rate is 71%, and the average rent is 22 yuan / m2 / month). It should be noted that the rental rates in Shanghai and Guangzhou are only temporarily lower than the national average (mainly affected by the epidemic), and the rental rates of high-standard libraries in both places are higher than 90% in the second half of 2019.
Everbright Securities Company Limited(601788) analyst he miannan also said: "At present, China has a certain scale of industrial storage land, but the structural problems of logistics real estate are becoming more and more prominent. The per capita storage area, especially the modern storage area, is still a certain gap compared with overseas developed countries; the market concentration of cold chain logistics industry is low, and there is a lack of leading enterprises in the industry. New entrants face the challenges of scarcity of high-quality plots and high development costs of new plots. In addition, under the urban expansion and transformation, the original logistics land is accelerated to reduce due to the impact of demolition, and the time cost of land replacement is large. At the same time, the upgrading and transformation of low-standard warehouses is limited by the scale and planning approval efficiency. "
