As incomes have grown in China, consumers across the country have increased demands for higher standards when it comes to the goods, products, and services they purchase. These products include fresh produce and medicines, which the demand is proving to be a boon for the cold storage logistics market.
Alongside this increasing demand for quality, China's fresh food e-commerce industry has been rapidly developing. According to Euromonitor and Qianzhan Industry Research Institute, in 2019, the country’s fresh food e-commerce market size was about RMB 288.8 billion, an increase of 19.1% year-on-year, and accounted for more than 5.6% of the total fresh food industry market in China.
Given the demand-led industry growth that cold chain logistics has enjoyed in recent years, cold storage logistics warehouse supply, in terms of storage space area, has also grown significantly in China over the same time period.
According to Warehouse in Cloud (WIC), total cold storage logistics warehouse stock in the country exceeded 6.65 million sq m in 2019, accounting for 2.15% of the total logistics warehouse market.
Looking at China’s cold storage logistics warehouse distribution by storage space area, according to WIC, the top five provinces with the most stock in 2019 were Liaoning, Henan, Sichuan, Jiangsu, and Guangdong. Each of these provinces has more than 390,000 sq m of total stock, with Liaoning’s total cold storage warehouse stock area standing at more than 1.06 million sq m.
Comparing selected provinces by cold storage logistics warehouse vacancy, Nanjing recorded the highest average rate at 15.5% in 2019 while Chengdu, Zhengzhou, and Guangzhou all enjoyed vacancy rates below the 4% mark.
Rents on a city-level vary greatly, generally higher in China’s coastal regions but lower in inland regions. Beijing, Shanghai, Guangzhou, and Dalian all enjoyed rents higher than RMB 100 per sq m per month in 2019—some of the highest rental rates for cold storage logistics warehouses in the country.
The Impact of the COVID-19 Outbreak
Unsurprisingly, the COVID-19 outbreak had a significant impact on China’s cold chain logistics industry and cold storage logistics warehousing. Home confinement spurred an explosion in online shopping as people turned to online retailers for fresh food items and home-delivered meals.
Moreover, many people who had never fully embraced online shopping before, including older generations, had to quickly adapt to and embrace this mode of purchasing. The resulting spike in online shopping, especially for daily necessities, boosted online purchasing volume of fresh food and medicinal goods during China’s lockdown period.
Even before the COVID-19 outbreak, the cold chain market was predicted to experience healthy growth. The "China Cold Chain Logistics Industry Report, 2019-2025” declared the cold chain logistics industry in China to be worth RMB 522 billion by 2025 and set to enjoy an expected compound annual growth rate (CAGR) of 8.5% between 2018 and 2025. However, given COVID-19’s impact, these figures might need to be revised upwards.
In the future, there will be even greater emphasis from China’s industries on food safety and food security. With cold storage warehouse facilities being in a favourable position to assist in these two endeavours, it is likely that these facilities will see a surge in construction. This new premium cold storage warehouse facility supply will then be in a position to store the increased volume of fresh food and medicine inventory and ensure the storage health and safety levels of perishable goods and products are maintained to the highest standards.
With the overall cold storage logistics warehouse market in China expected to enjoy greater demand for storage space in the years to come, we expect many more investors, developers, and operators to pay close attention to this sector as the overall market continues to heat up.
