Logistics property developers pride themselves on their low staff numbers. They can turn over millions off a tiny staff count – or at least they could until China came along. In China, you hire someone, you get their family free. As a result, companies such as ProLogis have lost count of the actual numbers of people they employ. They are a little embarrassed about this.
But that’s all that embarrasses western developers about China. It is a market with colossal potential. Developers such as Gazeley and Prologis have thrown themselves into China with gusto. Gazeley opened there this year. ProLogis, which employs 600 people worldwide, officially has a quarter of its workforce in China.
ProLogis Park Beijing Airport has been designated as the official distribution site for Olympics-related equipment and material by the Beijing organising committee for the 2008 Games. The committee will use the entire 1.08 million-sq ft (100,000 sq m) park for warehousing, light assembly and administration of logistics operations. The committee has leased the park’s existing 283,000 sq ft (26,300 sq m) distribution facility and reserved all remaining land at the site, which will be developed into three additional buildings totalling some 793,000 sq ft (73,700 sq m). ProLogis will develop the remaining facilities over the next 12 to 18 months as the Olympics opening date approaches. Total investment at the site is expected to exceed US$43m. UPS is providing logistics planning and management services to the committee and will work with ProLogis at the park.
Beijing Capital International Airport is one of the world’s top 30 cargo airports, with a cargo volume expected to reach two million tons by 2008. The airport is undergoing a significant expansion to accommodate increasing passenger and cargo traffic expected as a result of the Olympics. ProLogis Park Beijing Airport is located adjacent to the airport inside Beijing Airport Logistics Park, one of three government-designated logistics hubs in the Beijing area.
ProLogis has also signed agreements to build new distribution parks at a variety of strategic locations across the country, including the new markets of Qingdao, Hangzhou and Ningbo, located along China’s eastern coast. Initial development at the parks will comprise more than three million square feet of industrial space and represent an aggregate total investment of more than US$90 million. Delivery of the new facilities will be phased over the course of the next 18 months. At the end of the first quarter, ProLogis’ had 4.1 million sq ft (381,000 sq m) of space in its Chinese portfolio, with a further 2.5 million sq ft under development.
“We continue to see tremendous opportunity in China,” says ProLogis chief executive officer Jeff Schwartz. “Economic expansion is occurring at extraordinary rates, with GDP growth at close to 10 per cent last year and foreign direct investment exceeding US$60 billion. Given the fundamental strength of the market environment, we believe the time is right to expand our China platform and broaden our market footprint.”
Schwartz notes that ProLogis continues to explore additional markets in China, including a number of inland cities, and will make investments in new locations as warranted by market conditions. “Expanding our presence here will enable us to address the substantial growth in demand we’re seeing for high-quality industrial facilities, and deliver long-term benefits for the company and its customers,” he says.
ProLogis Park Tongzhou will be located in Beijing Tongzhou Logistics Park, one of three areas in the city designated by the Beijing government for logistics operations. Development at the park will consist of two buildings totalling 293,000 sq ft, scheduled for completion in the first half of 2007.
ProLogis Park Chengyang will be located adjacent to Qingdao Liuting International Airport. Phase one of development at the park will consist of two buildings totalling 234,000 sq ft (21,800 sq m) and is scheduled for completion in the first half of 2007.
ProLogis plans to develop three new parks in Shanghai. One will be located at the Shanghai International Automobile City industrial park north west of downtown. Another will be in the Minhang area in the central part of the city. The third will be in western Shanghai in the city’s Songjiang industrial zone. Together, initial development at the parks will comprise more than 1.5 million sq ft (141,400 sq m) of industrial space.
ProLogis Park HEDA will be located in the Hangzhou Economic & Technological Development Area (HEDA), which covers more than 100 sq km and is one of China’s most successful industrial parks. Hangzhou is the capital of Zhejiang Province and a centre of economic activity in the Yangtze River Delta. Phase one of development at the park will consist of three inventory buildings totalling 538,000 sq ft (50,000 sq m), scheduled for completion in the second half of 2006.
ProLogis recently signed a land reservation agreement for some 30 acres near the Ningbo port complex, China’s fifth-largest port by container volume. Ningbo, located on the east coast south of Shanghai, saw containerised port traffic grow by nearly 30 per cent in 2005. The park would be able to accommodate about 500,000 sq ft (46,000 sq m) of new industrial space at full build-out.
ProLogis Park Sanshan will be located outside the city of Guangzhou on China’s south coast, adjacent to the Sanshan river port complex. Phase one of development at the park will consist of two buildings totalling 492,000 sq ft (45,700 sq m) and is scheduled for completion in the second half of 2006. ProLogis already operates two other industrial parks in the Guangzhou metropolitan area.
According to property consultant Jones Lang Lasalle, Hong Kong is enjoying the fruits of the Chinese boom, too. Its latest research says that healthy global demand for goods has been fuelling trade growth to the former British colony, with exports up 10 per cent year-on-year during the fourth quarter of last year.
But availability is not as high as it was. Warehouse vacancy fell to a new low of 2.9 per cent of stock at the end of last year. Among recent significant deals, Schenkers took 33,000 sq ft in Tuen Mun at HK$4.20 per sq ft and a deal on 19,000 sq ft in Tsuen Wan made HK$5 per sq ft.
A warehouse landlord paid HK$238.5 million for the 281,715-sq ft Wilson Logistics Centre in Kwai Chung and is leasing it back to Wilson Logistics at a 7.25 per cent yield.
ProLogis is also a leading player in Japan. It has just announced it is to build a 661,000 sq ft (61,400-sq m) industrial facility adjacent to Tokyo’s Narita International Airport. The seven-storey, multi-tenant facility, to be called ProLogis Parc Narita III, will be ProLogis’ third distribution centre in the Narita sub-market. It will be built on a recently acquired, 12-acre parcel less than 1km from the airport’s cargo entrance.
Narita is one of the world’s largest cargo airports, with air freight volume exceeding 2.3 million tons per annum. ProLogis’ other two facilities in the area – ProLogis Parc Narita I and ProLogis Parc Narita II – total approximately 690,000 sq ft (64,100 sq m) combined. Both are let to Kuehne & Nagel.
ProLogis’ has around 12.3 million sq ft (1.14 million sq m) of industrial space in Japan, which is currently more than 97 per cent leased. The company has another 9.7 million sq ft under development. Major customers in Japan include Nippon Express, Askul, Hitachi Transport System Ltd., Sanyo Electric Logistics, Shinkai Group and Renown.