When people think of Dongguan, a city in southern China’s Pearl River Delta (PRD) region, the first thought that springs to mind is often “the world’s factory”. However, factories are now making way for warehouses as Dongguan becomes more popular as a new “logistics hub”. At the end of 2015, Dongguan had the second largest non-bonded Class A warehouse stock (0.4 million sqm) in south China, after Guangzhou (1.1 million sqm). What’s more, over the coming 3 years an additional one million sqm of new space is due to be completed. International developers will be the leading providers of new supply during this period, accounting for over 70% of all new warehouses; including new projects from leading foreign players such as GLP, Prologis, and Redwood. But what is attracting such large amounts of investment into the sector?
Dongguan is centrally located in the PRD region of Guangdong Province and sits between two Tier 1 cities, Guangzhou and Shenzhen. The city is surrounded by a comprehensive road network, including five major highways and within easy access to the Pearl River Estuary and South China Sea, making it highly accessible to surrounding PRD cities including Guangzhou, Shenzhen, Hong Kong, and Zhongshan.
In recent years, e-commerce firms have expanded rapidly in the PRD, with Dongguan ranking among the most preferred locations to operate, behind only Guangzhou and Shenzhen. This expansion has stimulated demand from both e-commerce retailers and Third Party Logistics (3PL) providers, which often require large, custom-built facilities. In one such example, warehouse property developer E-Shang constructed an 85,000 sqm built-to-suit facility for online retailing giant JD.
The development of the warehouse market in Dongguan has also been accelerated by the scarcity of land supply for logistics use in Guangzhou and Shenzhen. With fewer new, high-quality warehouses being built, vacancy in both cities has tightened, forcing tenants to meet requirements elsewhere. Dongguan’s close proximity to both Guangzhou and Shenzhen has enabled it to capture spill-over demand from both cities at more cost-effective rates.
Dongguan’s transition from a manufacturing base into a new regional logistics hub exemplifies the ongoing transformation of the PRD’s economic engine, from manufacturing and trading industries towards more domestic orientated industries that are focused on consumption demand. The ongoing development and investment in the PRD region may even one day see “the world’s factory” become “the world’s logistics hub”.
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