Investors chase UK warehouses on China e-commerce trade

Investment in Britain's warehousing sector is in fashion, thanks to a boom in China-related e-commerce activity that has put strain on the nation's warehouses－a trend that is likely to continue post-Brexit when European ports will be less able to handle UK's imports.

Major British asset management companies, such as Investec, are already capitalizing on the trend by investing in warehousing management firms, such as Tritax Big Box and Prologis, while the Shanghai-based private equity firm PGC Capital is preparing for the launch of a 1 billion yuan ($145 million) fund to help Chinese institutional investors reap returns.

Denise Li, CEO of PGC Capital, said the fund is already assessing three-to-five warehouses near Manchester for potential investment.

Atul Shinh, an investment specialist at Investec, said investing into warehouse management firms offers a steady and attractive yield, with cash flows from rent and potential for capital appreciation.

At the core of the profitability of warehouses is the huge UK-China e-commerce trade.

Wayne Yu, vice-president and operations director at STO Express Europe, estimated that Chinese exports comprise 60 to 70 percent of the UK's e-commerce market in the number of items.

STO, a Shanghai-based delivery firm that expanded into the UK in 2004, now rents about 10 warehouses across the UK, most of which were established in the past two years or so. Its shipment volume in 2016 grew by 50 percent.

Oscar Lin, manager at London-based Onetwothree Logistics, which rents warehouses in Slough, Felixstowe and Ipswich, serving both the sea and airfreight trade, has paid more rent each year.

"We only found the Ipswich warehouse last year, after searching for about a year and a half, because warehouse facilities are in demand in that area," Lin said.

"With increased warehousing facilities, we are able to serve customers more efficiently."