Shanghai’s key logistics real estate trends in 2023
Key trends in Greater Shanghai markets in 2023 include divergence across markets, adoption of ESG initiatives as well as integration of logistics and industry.
Logistics supply in the Greater Shanghai area is expected to remain strong over 2023 with divergence to be seen in different markets
While major projects experienced construction delays due to the Covid-19 flare-up in 2022, the Greater Shanghai area is expected to see a record-high supply level over 2023. However, supply pressure will vary from market to market. For example, Shanghai, Suzhou, Taicang and Jiaxing are expected to see a supply wave in the coming year, whereas Kunshan supply is expected to hold current momentum. Meanwhile, the Wuxi market is anticipated to remain tight with limited future supply.
Figure 1: Non-bonded stock – Greater Shanghai
Source: JLL Research
Figure 2: New Supply (non-bonded) – Greater Shanghai
Source: JLL Research
Governments and businesses join forces in warehouse decarbonisation
As an essential participant in the logistics value chain, warehouses can have immense potential for sustainability. On one hand, developers and landlords are actively adopting sustainability initiatives. For example, in the Yangtze River Delta (YRD) region, the number of LEED-certified warehouses has been increasing steadily since 2019, with about 80 warehouses certified by the end of 2022. Meanwhile, other stakeholders like investors, institutions and tenants are paying more attention to ESG initiatives in logistics parks under the ‘Carbon Neutral 2060’ target set by China.
On the other hand, with ‘Carbon-Peak 2030’ and ‘Carbon Neutral 2060’ targets in place, related policies introduced by local governments have been another source to power the transformation of green warehouses. According to Shanghai Ecological and Environmental Protection: The 14th Five-year Plan, starting from 2022, all newly built government buildings, schools and industrial assets are deemed to have at least half of their rooftop space with photovoltaic panels installed. Meanwhile, developers as well as major e-commerce firms, who have already built their own logistics networks, are actively participating in installing photovoltaic panels in their logistics parks. They are also forming strategic partnerships with related companies.
Figure 3: LEED-certified warehouse in YRD region
Source: U.S. Green Building Council
The integration of modern warehouses and industry is expected to accelerate
Development of the manufacturing sector, especially the acceleration of emerging industries, will form a significant part of the high-quality development of China’s economy. Meanwhile, the benefit that modern warehouses could bring to the supply chain, including enhancing its resilience of elasticity, have been increasingly important.
In the YRD region, the organic combination of warehouses and industries has been observed in some new and ongoing projects. Considering the scarcity of logistics land and increasing requirements on land output from local government, we believe there will be an increasing number of logistics projects to introduce industrial functions, especially in the region with clear industrial orientation and supportive policies.