Prologis China: If You Build It, They Will Come

Thursday, July 26, 2007 15:20

With logistics being one of the major themes of All Roads Lead to China, it was a pleasant surprise to find this Youtube video. An interview conducted by SCMP of Angela Zhao (VP of Investment), this interview gives viewers a basic understanding of their plans.

[youtube width=”425″ height=”335″]http://www.youtube.com/watch?v=WhQYIjrw6cE[/youtube]

In the interview, Ms. Zhao was asked:

1) What are your expectations for the China market

1.5 million square meters of space in operation in the China market, with another 800k to 1 million square meters of space coming online per year in the forseeable future.

Total investment to date has been 500m USD, with another 300 – 500m USD per year, or about 375 ~ 500USD per square meter

I guess they really will be developing all the land they recently aquired in Shenzhen, Qingdao, Hangzhou and Ningbo, Changsha, Chengdu, Chongqing, Nanjing and Wuhan,

2) Why are you confident about growth in China?

  • Continuous economic growth in China and “most of the manufacturers are already here”
  • China’s top 7 ports are all in the top 25
  • Population who can afford to consume is growing

In addition, I would like to add one point which is that Prologis should feel confident because they read the trend chart before anyone else, and now their facilities are in place. Others, including Chinese competitors and international operators, took too long to make the investment trigger. While other companies were worried about filling their space, Prologis worried about building the strongest network.

and it doesn’t hurt that the rise in pricing offset any loses that they may have incurred along the way.

3) Who are your competitors in China?

it’s very hard to describe because there are quite a few foreign players in the market, and we can see big local developers in various regions. they are all competitors, but they are regional competitors

Again, this is why Prologis should feel confident. They are the first to build out in Suzhou, Beijing, Shanghai, Shenzhen, and Guangzhou with all the other commitments as per the above.

In case you are wondering though, their strongest direct competitors are (Goodman, AMB Property Corp, Mapletree Logistics Trust Management, Hutchinson Whampoa, and Kerry, with strong indirect competition from the large regional and international logistics firms who are beginning to build their networks out (Shanghai Beifang, Yellow, & HTB Logistics)

4) Over the next 5 years, what are your expasion plans?

19 cities in the next 2-3 years, and then spend the following 2 years strengthening existing markets.

In case you are interested in potential 19 markets, my guesses would be (links are to our profiles of those cities): Beijing, Changsha, Chengdu, Chonging, Dalian, Dongguan, Guangzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Suzhou, Tianjin, Wuhan, Xiamen, Xian, Zhengzhou

5) As an investor in the Mainland, what are your major concerns?

Transperancy and stability of the regulation

Policy risk is a major concern for nearly everyone in China, and for real estate investors the last 2 years have seen a number of new taxes and policy changes. You can learn more through our previous posts

Prologis is definitely on top of their game, and while doing a bit of research for this post, I saw a post by someone else who said they wished they had held the stock… I wish I had bought the stock when I first met with their China head 4 years ago.

For any of the foreign groups in the logistics markets, the big question has always been how much do they invest versus how much do they operate through either partners or rented space. Ideally, UPS, Yellow, and others would all like to have their 45 warehouses & 8 DCS all in place and running at capacity, but until they do they will have to rely on groups like Prologis to support them in cities that they have yet to establish their own presence.

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One Response to “Prologis China: If You Build It, They Will Come”

  1. Prologis China: If You Build It, They Will Come | Top China Suppliers says:

    July 26th, 2007 at 9:39 pm

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