Chinese Logistics Partnership gets $1.75 billion in funding to grow its logistics real-estate footprint

 (Photo: Shutterstock)
(Photo: Shutterstock)

As logistics companies scamper towards tightening and optimizing their supply chain processes, they are confronted with two major frontiers – last-mile delivery and warehousing. While the former usually addresses challenges concerning visibility and route optimization, the warehousing conundrum involves bolstering facilities through extensive and sustained investment over a period of time.

In many ways, China is surging ahead in the race towards creating futuristic warehousing spaces, buoyed by an exploding e-commerce scene at its wake. With the potential of automation on the warehousing floor, conventional warehousing methods are falling out of vogue, as robots are phasing out human workers from the space – as is evident with the modern warehousing facilities being built in China now.

However, as cities overflow their borders and expand rapidly, real estate prices are hitting the roof, leading to a dearth of vacant spaces to construct new warehouses in. One of the nagging issues with warehousing is the existing conventional spaces which make up a bulk of the total available warehouse inventory. For instance, modern warehousing in the U.S. accounts for only 11% of the country’s total warehouse inventory.

Logistics companies around the world are now waking up to the reality of modern warehousing and are now investing heavily in real-estate to cash in on the logistics real-estate wave. The Chinese logistics association between the Canada Pension Plan Investment Board (CPPIB) and Goodman Group, the Australian global logistics real-estate expert, is now pouring more resources into their already well-fed partnership, by announcing an additional $1.75 billion of equity – taking their total investment to $5 billion. In this fresh round of financing, 80% of the funds would reportedly come from CPPIB.

The Goodman China Logistics Partnership (CNLP) as it is called, was established in 2009 to be a part of the growth story of the Chinese logistics industry and has since then expanded its portfolio to include 33 properties totaling over 2.5 million square meters of warehousing space. This round of investment is a significant step-up from the previous rounds, as the partnership had to contend with the rising real-estate prices in the country.

“This round is a bit bigger compared to the past because land price in China is more expensive and land for logistics is very scarce. We will build more multi-story buildings instead of single-story buildings that will consume more capital,” said Jimmy Phua, the managing director, and CPPIB’s real-estate investments Asia head.

As the country grapples with the lack of space to construct sprawling warehouses, the idea is to level up on the future structures. Most of the current warehousing inventories are single-storied structures, taking up a lot of space that could be used more productively. Even with single-storied buildings, increasing the structure’s clear height could accommodate taller pallets and thus make more volume available for storage.

CNLP has mentioned that it plans to use the new investment injection into working with industry partners to co-invest in warehousing projects that could help ease capital pressure and also grow its domestic market share. The company is backed by, the logistics titan from China, which has set its sights on completely automating its warehousing floor, with one already in place at Kunshan. The automated warehouse now handles 200,000 orders a day but by employing just four people, who work on servicing the robots that run the site.

Apart from the $1.5 billion flowing into CNLP through CPPIB and the Goodman Group, the holding is also entering into a joint venture worth $300 million with LaSalle Investment Management, according to its announcement last week. LaSalle, a Shanghai-based building major, is looking to leverage this association to acquire a network of logistics spaces in the country, while also reserving certain pre-emptive rights on existing logistics assets controlled by CNLP.

On the other end, CNLP would have a lot more resources in its coffers to expend, as it looks to expand further and position itself as the largest logistics facility operator in China.

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Vishnu Rajamanickam, Staff Writer

Vishnu writes editorial commentary on cutting-edge technology within the freight industry, profiles startups, and brings in perspective from industry frontrunners and thought leaders in the freight space. In his spare time, he writes neo-noir poetry, blogs about travel & living, and loves to debate about international politics. He hopes to settle down in a village and grow his own food at some point in time. But for now, he is happy to live with his wife in the middle of a German metropolitan.