Logistics companies have been flocking to the China (Shanghai) Pilot Free Trade Zone to build new facilities and new operations. [Photo / China Daily]

Firms in Yangtze Delta to enjoy lower shipping and export costs

The China (Shanghai) Pilot Free Trade Zone is expected to catalyze demand for logistics facilities in the eastern region of the city, helping reverse an imbalance that sees demand for such services heavily concentrated west of the Huangpu River.

Since the State Council approved the new FTZ, companies dealing with trade, logistics and manufacturing have flocked to register businesses there.  

"Feedback from our marketing department shows that enquiries for logistics and industrial property projects have risen significantly in recent days," said Chen Zhongwei, head of research at real estate firm CBRE China.

The FTZ is likely to benefit logistics companies in the Yangtze River Delta region by lowering their transportation and export costs. The zone's comprehensive nature will also enable them to develop multiple services to meet rising market demand and expectations amid tougher global competition.

"The FTZ will help in terms of international shipping, as it will serve as a common gathering point for logistics companies to collect goods that are ready for export," said Yang Chuanhua, manager of Shanghai Hongchuang Logistics Co Ltd, which is in Shanghai's Fengxian district.

Hongchuang plans to set up a warehouse near the FTZ in Pudong New Area so it can gather goods from different cities and export them via Shanghai's port, which will allow the company to offer a cheaper service.

"Small logistics companies could also band together to operate joint warehouses near the FTZ," said Yang.

The FTZ will also help upgrade the local logistics industry by building bridges between domestic and global companies in this field, he added.

Given the upbeat expectations, investors will be encouraged to raise their stakes in the warehouse and logistics sector, driving rents and property prices to new highs.

The industrial property market in the expanded Yangshan Bonded Port will be one of the main beneficiaries, as land and property prices there remain low with plenty of undeveloped land.

But while office rents in the FTZ have begun to soar, warehouse rates are relatively stable.

"This is because most of the warehouse and storage facilities in Waigaoqiao are occupied. It will take time for the rent to go up as most of the tenants have signed three-year leases," said Su Zhiyuan, head of industrial operations for real estate services company DTZ China.

By making trading more efficient and convenient, as well as opening up related services in the shipping, logistics and financial sectors, the FTZ will generate huge demand in the long run for high-quality warehouses situated there, said Chen.

There are about 780,000 square meters of premium warehouse space within the zone. Daily rents are 1.1 yuan (18 US cents) to 1.5 yuan per sq m, and the average vacancy rate is 20 percent. The corresponding rate in west Shanghai is just 1.4 percent.

"It is worth noting that the FTZ encompasses former bonded areas, where up to 90 percent of the existing 11,000 companies are related to trade and logistics. This has built a solid foundation for investors to tap logistics demand in the FTZ area," said Chen.