China Warehouse Sector:Emerging strong players

Shortage of modern warehouses in China. Despiterapid investments in warehouses over the past few years,only 11% of China’s warehouses are of global standards.

    This is insufficient to address the rapid growth indemand from e-commerce and 3PL (third party logistics)players. As such, developers, e-commence players andprivate equity have been investing more in the sectorover the past three years.

    But, only those with access to land, low costfunding, talents and tenants will succeed. Access toland is the most difficult entry barrier. Despite theChinese government’s growing emphasis to promotegrowth and efficiency in the sector, industrial landsupply has been falling over the past two years. Thisimplies that only those with land will be able to reap thebenefits. Chinese players have advantages over theirforeign peers in this aspect but foreign players oftenhave easier access to capital, tenants and talents.

    Chiwan, BPHL, CSC and GLP stand out. SOE-backedChiwan owns Blogis, which has the second largestwarehouse land reserve and potential for B-to-Hconversion. BPHL, another SOE-backed company, isfocusing on cold chain and bonded logistics services, andit should outperform peers given the promising outlookof this niche segment. CSC's leading position in trademall business will allow it to have easier access to landsand grow its warehouse business. We continue to likeGLP for its leading position in China. Vanke’s warehousebusiness also has strong growth potential which is worthof note if spun off.