Real-time fashion drives warehouse demand in the Greater Bay Area
Digital development has bred new business models, improving the efficiency of supply chain operations and driving logistics warehouse demand.
The pandemic has changed consumer behaviour and accelerated online shopping. Comprehensive e-commerce platforms, consumer goods, and 3PLs have become the main sources driving warehouse demand. Recently, an e-commerce company (which we will anonymize and name company S) showed strong demand for high-standard warehouses in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA). As of 2019, company S and its upstream suppliers and platforms had rented approximately 100 sqm high-standard warehouses in Guangzhou, Foshan, and Zhaoqing.
The underlying logic of real-time fashion
Some garment and textile companies have upgraded to having centralised e-commerce platforms. For example, company S applied a new business model of real-time fashion. Unlike traditional retail and fast fashion, real-time fashion interacts with consumers directly through an efficient supply chain. This model requires companies to organise their industrial upstream and downstream better.
Figure 1: Evolution of Fashion Retailing Industry’s Business Model
Source: JLL Research, Public Information
Establishes a systematic supply chain to support real-time e-commerce in the GBA
Cities in the GBA have a complete manufacturing foundation compared to other city agglomerations. In specific, second and third-tier cities feature export-oriented economies and a mass of SME components, making them a fertile ground for developing real-time e-commerce.
Originated in Jiangsu province, company S expands in the GBA after a majority of its supply chain has relocated to the emerging areas of Guangzhou and Foshan. A multitude of small garment manufacturers constitute a complete supply chain, forming a unique industrial ecology in these two areas. They offer significant flexibility, with tiny stock-keeping units accepting small orders of even 30 pieces. Thus, company S has high efficiency and fast reaction facing market dynamics.
Moreover, by wide usage of big data to provide stable orders, better design, brand resources, and advanced management within supply chain ecology, the cooperation of company S and small suppliers promotes the local apparel industry, breaking the dilemma of traditional manufacturers. Consequently, more players will involve in the game.
The apparel industry became real-time, boosting high-standard warehouse demand
Figure 2: Supply Chain of Real-time Fashion Retailing Industry (E.g., “S”)
Source: JLL Research
The optimised supply chain drives the demand for high-standard warehouses. Enterprises like company S are responsible for collecting and storing readymade clothes from small factories. These large-scale, standardised warehouses, storing design varieties at convenient locations, enhance delivery efficiencies. As the industry expands, upstream suppliers and exchange platforms need high-standard warehouses for transfer to speed up raw material centralised. Also, distribution and origin warehouses help shorter supply chain cycles and react appropriately for the market dynamics.
Figure 3: Overview of Company S’ Supply Chain Network
Source: JLL Research
Real-time fashion encourages the logistics warehouses industry in GBA
This formula for success is equally applicable to traditional manufactures. The interaction between real-time fashion and traditional manufactures will drive high-standard warehouse demand in GBA shortly. Besides, Western and Northern Guangdong, accommodating manufacturing industries moving from core cities, will share increased logistics warehouse needs.
Looking ahead, while active demand will increase rents, future supply will keep moderate. Emerging areas still have competitive advantages in land cost and limited supply of high-standard warehouses. GBA market will usher in new developing opportunities compared to other peripheral cities. In this context, focusing on logistic warehouses in GBA in advance and attending to the real-time fashion demand will help market participants gain an edge.