China is a very large country, with plenty of space for industrial expansion.
No wonder then that foreign investors are looking more closely at buying into real estate specifically that which is connected with the logistics market.
Cargo logistics, not just air freight, has become big business worldwide.
However, China continues to play the leading role in development and expansion in this sector.
Autonomy was in the past never a Chinese virtue.
But, things have changed and more and more regions within this vast country are successfully setting up their own logistics centers geared towards, among others, the handling and storage of goods produced in their own regions.
This has become more apparent on the airfreight side with regional airports gaining more and more autonomy and not having to move everything via the large hubs in Shanghai and Peking.
There seems to be enough to go around - and this despite a noticeable drop in production in China during the past months.
Logistics real estate investment steps up.
Foreign companies are intensifying their efforts to create joint ventures with Chinese real estate giants.
The largest player in this respect in China is the China Materials Storage and Transportation Development Company - in short - CMSTD.
CMSTD is a state owned warehouse logistics provider and has an extensive portfolio of logistics assets and land holdings in premium locations throughout China.
This company has just entered into a strategic partnership with the Singapore based Global Logistic Properties (GLP), with the aim of developing logistics facilities in China. GLP will have a 49% holding in this venture with the option of increasing to 50% in the future.
Both parties are expected to invest over 3.6 billion yuan ($585 million) in an initial venture of up to 1.3 million square meters of buildable area across China located on 2.7 million square meters of land which currently belongs to the CMSTD group.
And - it seems that this is only the start.
GLP has committed also to acquiring a 15.3% stake in GMSTD for an amount of 2 billion yuan. This is seen as their commitment to cementing ties between both companies in order to expand the acquisition of more land for the erection of logistics centers.
The Dutch pension fund - APG Asset Management has also announced that it will fork out up to $650 million in order to acquire 20 percent of shares from the Chinese warehouse service operator Shanghai e-Shang Warehousing Services Co. in order to set up a joint venture within China.
The continued growth of third party logistics, e-commerce and the evolution of domestic consumption modes, which combined with a present severe shortage of modern logistics facilities, makes ventures such as these very attractive for new investors in this vast market.
China will get five new airports
The above mentioned logistics investment trend is admittedly mainly geared towards domestic warehousing and distribution.
However, the Chinese government has just approved the construction of five new airports along with three massive rail projects.
The total value of these projects amounts to a staggering USD$ 24.5 billion.
The airports which are to be located in the northwestern provinces of Qinghai and inner Mongolia as well as the southwestern provinces of Yunnan and Guizhou and northeast Jilin province will need logistics infrastructure in order to be effective and competitive in their regions.
Here it is said that various foreign investment companies are looking to hook up with their Chinese counterparts in order to erect such facilities.
Despite the recent drop back in the Chinese economy, the government is convinced that building new airports and rail lines will further increase investment in the country.
The government is pushing its efforts to establish a nationwide logistics network with the decision to launch logistics projects in different regions.
One example is Xi’an in the province of Shaanxi which although it has no sea port, is busy with setting up its own regional logistics center by using its railway and airport centers for this purpose.
There is no reason not to believe that this will work when one considers how far this country has developed its modes of transportation during the past two decades.
John Mc Donagh