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Economics

A $100 Billion Bet on China’s Economy Sours as Warehouses Empty​

• Vacancies are climbing at many logistics and industrial parks
• E-commerce slowdown, company offshoring slams landlords

Unmute




WATCH: Economists surveyed by Bloomberg are now saying China’s economy may expand 5% this year. Minmin Low reports.Source: Bloomberg
By Shawna Kwan and Low De Wei
June 26, 2024 at 7:00 AM GMT+8


In many parts of China, the warehouses and industrial parks that used to be a magnet for international investors are grappling with a surprising slowdown in business activity.

Logistics hubs that were built in anticipation of a long-lasting boom in e-commerce, manufacturing and food storage are losing tenants, forcing building owners to slash rents and shorten lease terms.

Shares of real estate investment trusts that own China commercial properties have plummeted, and some of their managers expect their rental income to fall further.
Have a confidential tip for our

 

[k1976]

ESR Group gets regulatory nod to list logistics Reit in China​

Its IPO is expected to raise around 2.44 billion yuan

Michelle Zhu​

Published Mon, Jun 24, 2024 · 12:12 PM

ESR Group gets regulatory nod to list logistics Reit in China

ESR Group gets regulatory nod to list logistics Reit in China​

Its IPO is expected to raise around 2.44 billion yuan

Michelle Zhu​

Published Mon, Jun 24, 2024 · 12:12 PM
ESR-Logos Reit

• Kawasaki Ukishima Distribution Centre, one of ESR's properties in Japan. The real estate fund manager is planning to list its first public Reit in China. PHOTO: ESR GROUP
• Kawasaki Ukishima Distribution Centre, one of ESR's properties in Japan. The real estate fund manager is planning to list its first public Reit in China. PHOTO: ESR GROUP
• Kawasaki Ukishima Distribution Centre, one of ESR's properties in Japan. The real estate fund manager is planning to list its first public Reit in China. PHOTO: ESR GROUP
• Kawasaki Ukishima Distribution Centre, one of ESR's properties in Japan. The real estate fund manager is planning to list its first public Reit in China. PHOTO: ESR GROUP
• Kawasaki Ukishima Distribution Centre, one of ESR's properties in Japan. The real estate fund manager is planning to list its first public Reit in China. PHOTO: ESR GROUP

HONG Kong-listed real estate fund manager ESR Group’s application to list ESR China Real Estate Investment Trust (Reit) has been approved by the China Securities Regulatory Commission (CSRC).

As the Reit sponsor and project manager, ESR will now be able to provide the China-based logistics Reit a future pipeline of assets from its assets under management (AUM) and development pipeline.

ESR China Reit’s initial public offering (IPO) is expected to raise around 2.44 billion yuan (S$455.3 million).

 

[k1976]

ESR has committed to subscribe for a 34 per cent stake in the Reit, with the remaining 66 per cent to be taken up by cornerstone and retail investors as well as public institutions. The fund manager said so far, its China Reit has secured cornerstone investors including leading financial institutions and securities firms.

It projects an annual cash distribution rate of 4.5 per cent for 2024, and 4.6 per cent for 2025.

Gaining regulatory approval for the Reit’s upcoming listing “ushers in a new chapter of exciting growth” for ESR, said Stuart Gibson, the fund manager’s co-founder and co-chief executive.

 

[k1976]

$135 billion bet on China’s economy sours as warehouses empty​

Shares of Reits that own China logistics properties have plummeted, as average vacancy rates in east and north China approach 20 per cent. PHOTO: REUTERS
UPDATED

JUN 26, 2024, 10:13 AM

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A $135 billion bet on China’s economy sours as warehouses empty​

Shares of Reits that own China logistics properties have plummeted, as average vacancy rates in east and north China approach 20 per cent. PHOTO: REUTERS
UPDATED

JUN 26, 2024, 10:13 AM

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HONG KONG - In many parts of China, the warehouses and industrial parks that used to be a magnet for international investors are grappling with a surprising slowdown in business activity.
Logistics hubs that were built in anticipation of a long-lasting boom in e-commerce, manufacturing and food storage are losing tenants, forcing building owners to slash rents and shorten lease terms.
Shares of real estate investment trusts (Reits) that own China logistics properties have plummeted, and some of their managers expect their rental income to fall further.

Average vacancy rates at logistics properties in east and north China are approaching 20 per cent, the highest in years, according to real estate consultancies.

More warehouses are being built, which is making the problem worse. “We are looking at a supply glut in logistics and industrial properties in China,” said Mr Xavier Lee, an equity analyst at Morningstar who covers the property sector.

The deterioration has been disappointing for property owners that were counting on an economic rebound in China in 2024.

 

[k1976]

Global institutions have collectively invested more than US$100 billion (S$135 billion) in warehouses, industrial buildings, office towers and other Chinese commercial real estate over the past decade, according to data from MSCI Real Capital Analytics.

The foreign investors include Singapore’s GIC, CapitaLand Group, Blackstone, Prudential Financial’s PGIM, and many others.

 

[k1976]

Warehouses that were built to house e-commerce fulfilment centres, giant refrigerators for chilled or frozen produce, and spaces for businesses to hold their components and manufactured goods are not being utilised as much as their owners hoped.

China’s domestic e-commerce growth has been sluggish, as shoppers have become thriftier. The country’s online penetration rate for retail sales is already relatively high at 30 per cent.

Heightened geopolitical tensions are prompting companies to shift some of their manufacturing offshore, to cater to end-customers that want to reduce their reliance on China. That and a slowdown in cross-border trade have also reduced businesses’ need for storage facilities in mainland China.

 

[k1976]

Of the 20 major Chinese cities that Cushman tracks, 13 saw logistics rents drop in the first quarter from the preceding three months, led by Beijing and Shenzhen, with falls of 4.2 per cent and 3.9 per cent respectively. An additional 33 million sq m – equivalent to around 4,600 soccer pitches – of new supply is scheduled for completion by end-2026 in the country, the consultancy said.

CapitaLand China Trust, which owns malls, business parks and other properties, acquired four logistics parks in Shanghai, Wuhan and other cities in late 2021 for a total of 1.68 billion yuan (S$313 million). The logistics portfolio’s overall occupancy rate dropped to 82 per cent at the end of 2023 from 96.4 per cent a year earlier.

The Singapore-listed Reit’s shares have lost 27 per cent in the year to date, versus a 2.7 per cent gain for the benchmark Straits Times Index. “We are actively engaging prospects for our logistics parks to further improve occupancy,” said a spokesperson for CapitaLand China Trust.

 

[k1976]

Boss John, this us also your golden opportunity to huat big big in Tiongkok de woh

 

[congo9]

Boss John, this us also your golden opportunity to huat big big in Tiongkok de woh

Johntan boss can only thrive If there's PAP protection and blessings. For example in Singapore.

For China now, you leave it to indians and other brave souls who has deep deep deep pockets. Someone who knows how to get off cleanly even shit hit the fence.

 

[k1976]

Johntan boss can only thrive If there's PAP protection and blessings. For example in Singapore.

For China now, you leave it to indians and other brave souls who has deep deep deep pockets. Someone who knows how to get off cleanly even shit hit the fence.

No worries, Boss John can always send his chiobu dotters to Beijing Imperial Palace mah

 

[k1976]

Shit hit the Fan moment is now or it is 万福金安？

 

[congo9]

For china, they CCP is not feeling the heat yet. Flood can continue to kill so many people and yet they can keep mum. Seal of news
When the real estate shit hit fence last 2 years, they can keep it under warp till almost now. Only now people knew the real estate issue.

Shit hit the Fan moment is now or it is 万福金安？

 

[congo9]

For the warehouse and industrial estate, word has been going around.
I don't know how much our GLC lost this time round in china.