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News Release

Shanghai

Increasing Demand for Cold Chain Logistics in China

According to Jones Lang LaSalle's first white paper on China’s cold chain logistics market


Jones Lang LaSalle’s recent research <China Domestic Logistics: Huge Potential in Cold Chain> notes key opportunities for investors and developers in the cold chain industry in China due to the expected increase in demand and current lack of maturity in the market.

“China’s consumer food market has experienced vigorous growth in the past decade,” noted Stuart Ross, Head of China Industrial, Jones Lang LaSalle. “Traditional eating habits in China are changing. As incomes rise, Chinese consumers are eating more animal protein and dairy products, as well as convenience food and snacks like frozen meals and ice cream. At the same time, Chinese consumers are becoming more aware of food safety issues. Taken together, the need to develop a more robust cold chain infrastructure has been greater than ever.”

However, China’s cold chain market is seriously underdeveloped. It is estimated that only 15% of products that should be temperature-controlled are handled properly. Because of that, large amounts of fruits and vegetables spoil, thus potentially putting human health at risk. The situation can be attributed to regulatory immaturity, inexperience and lack of awareness among Chinese consumers, undeveloped infrastructure, inadequate service providers, and lack of human capital.

In some of the big cities in China, regional cold chain logistics systems are emerging. Increasing internationalization brought by events like the Olympics, the Shanghai World Expo, and the Asian Games in Guangzhou have been driving the development of cold chain in the Tier I cities. Tier II cities with large export markets such as Qingdao and Dalian are now seeing significant development as well.

A growing number of foreign and domestic players are looking to build facilities in the country. Australia’s largest cold chain logistics operator, Swire Cold Storage, entered the South China market in 2008; and recently, one of the largest US operators, Preferred Freezer Services (PFS), announced its plans for a cold storage facility in Shanghai.
“From a real estate perspective, we believe that in the short term, the opportunities in the cold chain logistics market will remain in the Tier I and major costal cities,” added Ross. “Looking further ahead, we are confident that opportunities will surface across China.”
 
The report estimates that the market for public refrigerated warehouses will grow roughly 24% per year for the next five years in order to meet the demand of the growing consumer market and an increasingly dynamic food export sector. Compared to the standard modern warehouse market, which is already widely perceived as the fastest growing property sector in China, the growth rate of the refrigerated warehouse should be greater. 

“The potential of the market cannot be ignored,” he continued. “The country will need a large amount of investment in training, business integration, and infrastructure, which we believe will generate considerable returns. Meanwhile, advanced expertise will be needed and regulatory oversight will have to be consolidated and improved. The immediate actions of operators throughout the entire chain of manufacturing, processing, logistics, and retail will be required. As always, early entrants will find themselves better positioned to take advantage of this huge opportunity,” concluded Ross.