South China has become one of the key logistics markets in China, demonstrated by the large supply of non-bonded warehouses, high freight volume, record mileage of expressways, and soft factors such as the degree of openness of the ports and convenience of customs clearance. The Development Plan for Guangdong-Hong Kong-Macao Greater Bay Area unveiled in 2019 further propels the development of the region’s transportation infrastructure and strengthens each city’s logistics market positioning.

As the city clusters in South China keep growing, the logistics market for each city shows the following trends:

Dongguan logistics market holds equal importance as Guangzhou and Shenzhen

Guangzhou, as the retail and distribution centre of South China, is a comprehensive logistics hub in the region. However, roads and warehouses in its core submarkets lag behind in the state of the art and high-quality facilities. Meanwhile, Shenzhen is positioned as an innovation centre, where industrial land resources are more focused on R&D, thus the supply of non-bonded warehouses is highly limited. As a result, Dongguan, which sits between Guangzhou and Shenzhen, has been rapidly growing. It has become one of the most crucial logistics markets in South China. It is now considered a preferred location for warehouses by both developers and operators. Its locational advantage and its potential for further growth make Dongguan the only logistic market that can serve and reinforce two Tier I cities at the same time.

Chart 1: The total stock of non-bonded warehouse and vacancy rate in four cities

Source: JLL

Driven by R&D achievement, demand from manufacturing industry surged in 2019

Shenzhen’s limited supply of non-bonded warehouses, as well as the development and clustering of the manufacturing industry in the region driven by Shenzhen’s tech advancement, have spurred the logistics demand in nearby Tier II and Tier III cities.

As a manufacturing centre on the west bank of the Pearl River, Foshan’s warehouse market attracts manufacturers not only from Foshan but also from surrounding cities. It also absorbs spillover logistics demand from Guangzhou. Therefore, Foshan saw a sharp increase in warehouse demand in 2019.

Figure 1: Non-bonded warehouses monthly rents in key logistics markets

Source: JLL

Logistics territory expands towards Tier II and Tier III cities as transportation networks continue to improve

Road networks between cities continue to improve in the region. In 2019, a total of 493 kilometres of expressways were added to Guangdong province. By the end of 2019, the total mileage of expressways in the province reached 9,495 kilometres, topping all provinces in China for six consecutive years. The newly built expressway sections improve the connectivity between Guangzhou, Dongguan, Huizhou and other cities in the region. Moreover, the Nansha Bridge and the Hong Kong-Zhuhai-Macao Bridge strengthen the connection between the eastern and western banks of the Pearl River. Thanks to the improved distribution efficiency, developers and tenants have started to set their eyes on other Tier III cities in the region, such as Jiangmen and Huizhou with lower rents and abundant land resources.

Figure 2: Drive-time area from Guangzhou and Shenzhen

Source: JLL

In the future, cities in the region will continue to move towards a more sustainable landscape through transportation infrastructure development and efficient logistics positioning. The South China logistics have a bright future.

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