China’s e-commerce giants are starting to build a new crop of smart warehouses that can keep up with the surging growth of the world’s largest online retail sales market.
But that trend promises to add enormous costs to warehouse development. Modern robot and conveyor-belt systems require a multitude of upgrades not found in traditional warehouses like higher ceilings, more air conditioning, the amount of mezzanine space and other infrastructure.
GLP, China’s largest owner of warehouse and distribution space, began offering tenants financing for smart upgrades and expansion two years ago, the company said. Other warehouse landlords may soon feel pressure to follow suit, market participants say.
In May, GLP created a private-equity fund to invest 10 billion yuan ($1.5 billion) in robotics, automation and big-data sectors that could complement its logistics real-estate business. It’s “not sufficient to focus just on the facility itself,” says Victor Mok, co-president of real estate at GLP China. “Our focus is to build a logistics ecosystem which considers every aspect of the supply chain, not just warehouse space.”
To be sure, smart warehouses still make up just a sliver of the Chinese market.
But both foreign and domestic investors are carefully watching the smart-warehouse trend because the logistics property market is one of the fastest-growing sectors in the Chinese commercial real-estate industry. Last year, investors acquired $4.4 billion worth of warehouses and distribution centers, up from $3.2 billion in 2016, according to data firm Real Capital Analytics.
