Global Logistic Properties (GLP), China’s biggest modern warehouse operator, plans to increase space at new projects by up to 25% annually in the next two years as e-commerce grows and retail chains expand. The company, part-owned by Singapore’s sovereign wealth fund GIC, is beginning construction of 2.5 million square meters of warehouse space in China this year, compared with 2 million sq m a year earlier, Chief Executive and Co-founder Ming Mei said. The company has a current portfolio of about 8 million sq m in China. Logistics properties are “the most attractive real estate opportunity” in China as consumers buy more from e-commerce companies including Alibaba Group and Amazon.com, fueling demand for storage space, according to a report by Jones Lang LaSalle. Singapore-listed GLP, which operates in at least 37 Chinese cities, expects business to also be driven by the expansion of chain stores such as Watson. “E-commerce is just one sector of growth,” Mei said. “At the moment, not only overall retail is growing, but the percentage of organized retail is also growing. And they’re the ones that drive our business.” Chain stores account for about 10% of retail in China and that percentage can grow to about 50% over the next decade, Mei said. China accounted for about 56% of the company’s net assets at the end of June. The new space GLP will add will be split evenly between first-tier and second-tier cities. Warehouse rents in China will probably grow around 5% annually on average in the long run, Mei said.

Kerry Properties intends to spin off its logistics arm in a Hong Kong listing. Kerry Logistics Network, a wholly-owned subsidiary, operated the largest distribution network and hub operations in greater China and Asean, Kerry Properties’ annual report said. It operated 30 million square feet of logistics space in more than 30 countries in five continents, of which 9 million sq ft were in mainland China. Former Singapore Foreign Minister George Yeo Yong Boon has been Chairman of Kerry Logistics since August last year. Net profit at Kerry Logistics, excluding a one-off gain from property revaluations, rose 10% last year to HKD815 million from 2011, as sales grew 20% to HKD19.3 billion. Kerry Logistics aimed to ride the growth of domestic consumption in China, leveraging its network in 2,600 cities and townships nationwide, the report said. Net profit margin, which exceeded 4% last year, was double the industry average of 2%, RCM Analyst Karen Chan said. Third-party supply-chain management, with a margin of 7%, was the key factor distinguishing Kerry Logistics from pure warehouse and freight-forwarding firms, she said. Of its 30 million sq ft of logistics space, a third is taken up by warehouses and nearly 40% by logistics centers. About 23% is used for port facilities. A third of the space is in Hong Kong, 27% in mainland China and 40% in other markets.

The London Metal Exchange (LME) has approved Kaohsiung in Taiwan to be the ninth port in Asia that can accept physical delivery of seven types of its metal contracts. The world’s largest metal exchange, which became a subsidiary of Hong Kong Exchanges and Clearing (HKEx) in December, said the Taiwanese city would be a delivery point for primary aluminum, aluminum alloy, copper, lead, nickel, tin and zinc. Kaohsiung is the first city in Asia to be added to LME’s delivery location list since Port Klang, Malaysia, was added in 2009. Charles Li, HKEx’s Chief Executive, said Kaohsiung warehouses would help in the delivery of metal to mainland users. Li added that he hoped the LME would be allowed to set up warehouses on the mainland in the future. “The LME has licensed more than 700 warehouses in 36 locations in 14 countries around the world, predominantly in North America, Northern Europe, and now, increasingly, East Asia,” he said. “Although only a small percentage of futures contracts are eventually settled in physical delivery, the possibility of physical delivery prevents futures prices from diverging too far from the price of the physical metal.” “It is important that the LME’s network of goods delivery points are located in the correct regions to meet the demands of the metals industry,” said Rob Hall, Director of Physical Operations at the LME. In Asia, the LME also has warehouses for the physical settlement of contracts in Singapore; Nagoya and Yokohama in Japan; Busan, Gwangyang and Incheon in South Korea; and Johor and Port Klang in Malaysia, the South China Morning Post reports.

China National Cotton Group has set up North China’s largest cotton storage base in Weifang city, Shandong province. Warehouses at the base have a total storage capacity of 100,000 metric tons and to date have stored more than 20,000 tons of the state’s reserve cotton. Officials said the base is expected to raise its commodity handling capacity as high as 500,000 tons, making it the largest cotton storage base in China.

The rapid growth of the e-commerce sector in China has triggered demand for quality logistics space, with demand often outstripping supply, according to  a recent market report from real estate service provider DTZ. China is set to overtake the United States as the largest e-commerce market in the world by 2015, but e-commerce companies will need to find ways to make more efficient deliveries to the more than 220 million online shoppers in China. Limited infrastructure, lack of warehouse space and the shortage of last-mile delivery expertise often makes it difficult for e-commerce companies to provide efficient services in lower-tier cities and inland areas. For investors and developers, the scarcity of suitable land is also an issue. Investors should consider investing in large companies with existing land banks, or in those that are redeveloping old facilities, the report said. The booming e-commerce market has also transformed the supply chain from being supply-driven to demand-led. This has important ramifications for logistics property in terms of site selection, specification and location. “We see a growing need for the development of small warehouses adjacent to the city markets,” said David Ji at DTZ. Modern logistics facilities account for just 2% of the total stock in China, meaning that the majority of property comprises middle- and low-end premises, mostly converted from factories and poorly constructed facilities, with inadequate height, insufficient loading docks and restricted vehicle accessibility. The lack of supply has also contributed to higher rentals in first tier markets, with logistics rents going up by 85% in some districts of Shanghai during the past year. The higher rentals have prompted many e-commerce companies to relocate their warehouses to lower cost regions, the DTZ report said. “Over 30 million new Chinese consumers — the equivalent of the population of Canada — are expected to make online purchases every year until 2015,” said Ji, as reported in the China Daily.