Research feedback of Chongqing warehousing market: short-term supply peak has passed, demand pressure has been put on and recovery has been slow

Industry status

    We recently investigated the sub market in Banan District, Chongqing, where the Chongqing logistics warehousing assets held by Zhongjin Pross REIT and Harvest Jingdong REIT are located.

    Comments

    The overall supply of Chongqing logistics and warehousing market is shrinking, and it is in the stage of gradual decline. According to our field research and communication and Jones Lang LaSalle's data disclosure, as of the first quarter of 24, the supply of high-grade warehouses in Chongqing's logistics warehousing market stock was about 5-6 million square meters (different institutions have slightly different statistical caliber), no new supply entered the market in the first quarter, and the new supply in 2024 is expected to be no more than 200000 square meters (mainly in the airport and western logistics park areas). Influenced by seasonal factors (such as the expiration of some zero rents after the end of the year's promotion of e-commerce) and supply factors, Jones Lang LaSalle's data shows that the rental rate and average monthly net effective rent (including property fees and excluding taxes) in Chongqing market in the first quarter were 77.4% and 16.6 yuan/square meter/month respectively. Looking forward to 24-25 years, based on field visits and exchanges, we believe that the short-term supply pressure of Chongqing's logistics market may ease, and the overall logistics market will enter the de industrialization stage, and the rental rate and rent level are expected to gradually stabilize.

    The sub market of Banan District (also known as the highway logistics base) is generally weaker than the big city, and Jingdong Logistics is one of the important tenants in the region. Banan sub market is an important storage sub market in Chongqing. According to the field survey, the inventory of high-grade warehouses in this region is about 600000 to 700000 square meters at this stage, with an average rental rate of about 62.9%. Jingdong Logistics is a single large tenant in this region, with a rental area of nearly 300000 square meters. High standard warehouse operators in the region mainly include JD, Pross, Shunfeng, Bailiway and some local operators. Among them, JD Asia No.1 and Pross (Chongqing) urban distribution and logistics centers are currently the pooled assets of Harvest JD REIT and CICC Pross REIT. According to the disclosure of the first quarterly report of REITs, 1 as of the end of the first quarter, their rental rates were 100% and 57.4% respectively.

    The market is under short-term pressure, and the strategy of "trading price for volume" may still be the focus of asset operation in the next stage. From the field survey, we believe that the demand of the sub market where REITs assets are located is still recovering slowly, showing the typical competitive characteristics of the stock market. We expect that in the short term, the main goal of asset operation is to improve the rental rate, and the rent level may still be under pressure, but due to the relatively limited supply in the future, the inflection point of operation may be approaching. In the medium and long term, we believe that the head warehousing operators can maintain the relative competitiveness of relevant asset operations by virtue of their investment attraction resources and active management advantages.

    Valuation and recommendations

    Keep the rating and target price of the covered subject unchanged.

    Risk

    Market competition intensifies; Tenant renewal rents have declined significantly.