Global Logistic Properties bullish on China

Asia’s largest logistic facilities provider Global Logistic Properties (GLP) is leasing most of its warehouses in China to domestically driven consumer industries.

Barring a global recession, GLP is confident the China market will help drive its growth and take up a larger share of its portfolio.

Online retail sales in China have doubled every year for the last five years, benefiting e-commerce retailers.

Market leader GLP is banking on the likes of Amazon and Taobao to drive demand for its modern logistics facilities in China.

GLP says its properties in China make up 42 per cent of its portfolio in net asset value terms, compared to 48 per cent for Japan.

And China’s share of GLP’s portfolio could surpass Japan’s in the years to come.

GLP’s deputy chairman, Jeffrey Schwartz, said: “Retail sales are actually growing 17, 18 per cent this year. That’s what drives domestic consumption. We are the infrastructure provider, the logistics chain. The reality is, 90 per cent plus of our leases today are focused on domestic consumption.”

The company is unfazed by weakening economic growth in China as it believes any slowdown has been confined to the low-value manufacturing sector.

Modern logistics facilities are also scarce in China enabling them to charge rents 30 per cent higher than its competitors in the lower end of the market.

But the risks of a recession cannot be discounted.

Ng Kian Teck, investment analyst at SIAS Research, said: “If a recession were to come, they may probably be the first ones to get affected, because people may pull back – they may prefer lower grade (properties) or they may ask for lower rents.”

The company is said to be preparing a US$1 billion IPO of its Japan assets. GLP has declined to comment on the “rumours”.

Source : Channel NewsAsia – 11 Apr 2012

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