Beijing's logistics market expands
Beijing's logistics market expansion from 2023 to 2025 will bring huge incremental opportunities to the city and change the existing market structure.
The first large-scale supply of logistics land in the past decade will break the development bottleneck caused by supply constraints in Beijing
Beijing has experienced a short supply of logistics land since 2016, limiting the supply of logistics projects. Last year, Beijing ushered in a large number of land auctions for the first time in ten years. The volume of non-bonded logistics land transacted so far is greater than the sum of the volume of transactions in the past ten years. We expect the logistics market to overcome the bottleneck in development caused by supply shortage. After two to three years of waiting for the development and construction of new projects, the new supply will quickly meet pent-up demand in the market.
Figure 1: The land supply of logistics in Beijing over the past ten years
Source: Beijing Municipal Commission of Planning and Natural Resources
New supply will create two new sub-markets: the Daxing International Airport (BDIA) and Pinggu sub-markets
From 2023 to 2025, it is estimated that 1.23 million square meters of new supply will enter the market, which is about 50% of the total stock of Beijing's current logistics market. A massive supply wave will spread across the city, emerging in two new logistics sub-markets. Relying on its strong air transport capacity and potential demand in Beijing, the BDIA sub-market will set the benchmark in the Beijing Capital International Airport submarket and become one of the high-end logistics sub-markets in the entire city. Pinggu District will gradually develop into the sub-market with the most competitive price due to its characteristics and advantages afforded by its multimodal transportation options, including roads, railway, aviation and shipping, and the support of national policies.
Figure 2: The total stock of each sub-market in Beijing in 2012, 2022 and 2025
Source: JLL North China Research
Since the logistics market in Beijing has a strong absorption capacity for new supply, demand will continue to exceed supply in the long-term
Although the amount of new supply is large, Beijing has maintained a high level of net absorption in logistic space. As such, supply additions are not expected to bring long-term pressure to the market, and vacancy rate will remain at a healthy level below 10% over the next three years.
Figure 3: Comparison: the total stock of the logistics market in Beijing and Shanghai
Source: JLL China Research
Comparing to another tier-one city, the total stock of Shanghai's logistics market is currently about 7.56 million square meters. Even after the expected expansion in supply, total stock of Beijing will only amount to 52.0% of Shanghai’s. Even after the large-scale supply wave, there remains a substantial gap in stock size between the two logistics markets.
Aside from releasing pent-up demand in logistics space, the expansion of logistics market will bring more possible assets to the investment market and attract potential real estate investors. Moreover, the entry of many new projects into the market is improving the warehousing service level of the entire city, thus bringing huge incremental opportunities to Beijing’s economy.