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As China e-commerce booms, private equity sees room for growth in storage space

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Richard Baty

View photosMoreAn employee works at a JD.com logistics centre in Langfang, Hebei province, November 10, 2015.

HONG KONG Reuters - When U.S. private equity heavyweight Warburg Pincus WP.UL started looking at China's logistics sector in late 2009, there were more modern warehouses in Boston than in the whole of the world's most populous country.

But as Chinese consumers embarked on an online shopping spree, demand has soared from appliance makers, express delivery firms and e-commerce companies such as Alibaba Group Holding Ltd and JD.com Inc, far outpacing supply and prompting a parallel binge in investment in warehouses and logistics businesses.

Deep-pocket investors including Carlyle Group LP, Canada Pension Plan Investment Board CPPIB and Warburg Pincus have splashed $12 billion on the sector in China since 2013, says real estate consultancy Jones Lang LaSalle.

"The thinking was even if it didn't necessarily scale to the size we were anticipating, we had a good sense that while Boston is a pretty decent size city in the U.S., China should have far more modern warehousing space over the longer term," said Jeffrey Perlman, who heads Southeast Asia at Warburg Pincus and also focuses on real estate investments across Asia Pacific.

Although China's economy expanded in the second quarter at the slowest pace since the global financial crisis of 2008-09, online shopping revenues have soared and are expected to double to 7.5 trillion yuan $1.13 trillion in 2018 from last year, consumer and internet consultancy iResearch estimates.

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Richard Baty
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