vice provider, developer, and sometimes even the real estate broker
and landlord to the investor.
This government-driven development model has done a good job
of increasing the local area’s GDP. However, this has proven to not
be the most effective or the most sustainable model for industrial real
estate development, since it does not encourage efficient land utilization or the formation of industrial clusters (i.e., a concentration of
manufacturers in a particular industry providing synergies of vertical
integration of suppliers and sub-suppliers supporting the main manufactured product or industry that is “clustered”). In addition, vanity projects built for the prestige of the local governments are often
chiefly motivated by GDP output, by foreign direct investment goals,
or for face-value reasons, but they lack a long-term synergy with the
local economy and the ability to attract blue-chip investors.
Several local governments have realized that a more effective way
to build their EDZs is to work with a professional third-party developer. One of the earliest privately developed EDZs in China, Suzhou
Industrial Park (SIP), is recognized across the country as one of the
best EDZs in China. Strategic planning, sufficient infrastructure, and
efficient management are some of the key factors contributing to its
success. Many local governments are now trying to introduce similar development models to their EDZs. For example, the Tianjin and
Guangdong governments have recently pioneered some successful
These projects demonstrated that professional developers are able
to do a much better job of strategic planning, land utilization, and
industrial cluster formation. The high-end industrial real estate developed by the private sector often serves as an incubator for the high-tech and high value-added industries, while standard EDZ facilities
built by the government work best for traditional lower value-added
manufacturing uses. The increased use of professional developers will
relieve the government from being the promoter and broker of the
local industrial properties, so that they can focus on providing investors with a good investment environment.
Many local developers are becoming more interested in industrial
real estate because these investments receive discounted land prices,
Although they have only been operating in China
for a short time, foreign real estate developers have
been investing heavily and growing rapidly in China.
Companies such as Ascendas, Frasers Property,
AMB, Shui On Group, CapitaLand, and Goodman
Group are expected to play a bigger role in China’s
industrial real estate market as they increase coop-
eration with local developers, governments, and their
After initial development comes daily management. This is where professional real estate companies can add substantial value to their properties.
Local developers are trying to transform themselves
from traditional real estate developers to sophisti-
cated real estate operators. For example, in Beijing’s Hi-Tech
Park LDUV, the developer is providing its industrial tenants
a set of business services including company registration,
government regulatory processing, HR support services, and
sourcing assistance. These services are well received by the
tenants and serve as a great value-add to the park.
Rapid Growth in Logistics Real Estate
The development of logistics facilities lags far behind the
development of manufacturing real estate in China. Although
there are thousands of warehouses nationwide, most of them
are sitting vacant because they are unable meet the sophisticated demands of the industry. The key components of a
logistics center, such as a strategic location, truck-high loading docks, adequate space for maneuvering and parking for
trucks and trailers, high ceiling clear heights, heavy floor
loading, well laid out inventory storage, and other necessary
supporting infrastructure, are absent from many traditional
humble warehouses in China.
Local governments have realized the importance of logistics facilities for the manufacturing and retail sector, and they
have made logistics one of the key encouraged industries
for investment promotion, providing additional incentives
including discounted land prices and fast-track regulatory
approvals for the development of logistics real estate.
Although ProLogis, one of the first foreign developers
in China, sold all of its China properties to Singapore-based
GIC in 2009, this move is not likely to slow the investment
in logistics infrastructure by other international players as
China’s logistics market continues to grow. China’s Q1 2010
exports grew 29 percent while imports jumped 65 percent
over the same period last year. Domestic retail sales grew by
18 percent in Q1 2010 compared with same period last year.
All together, China’s logistics market is valued at approximately US$ 176 billion.
Strong demand and growth in the market are reflected
in large investments in logistics facilities. Global Logistics
Properties, a GIC subsidiary, increased its total portfolio from
3.76 million square meters ( 40. 47 million sq. ft.) in December
2009 to 4. 4 million square meters ( 47. 36 million sq. ft.) in