An automatic logistics center with the biggest daily handling capacity in Asia will operate in Shanghai. Photo by Xinhua

As China’s domestic e-commerce giants build their own logistics networks, competition is intensifying among logistics property conglomerates.

The inland network retail volume in China has increased 99 percent annually over the past five years. At that pace, China will surpass the United States to become the world’s largest e-commerce market in 2015, according to the China Association of Warehouses and Storage.

Yet China lacks high-quality warehouse facilities for companies to store their goods. For that reason, e-commerce giants like Tmall, JD, Suning and Amazon aim to build their own warehouses and integrate them into dedicated logistics supply chains.

This trend augurs promise for China’s logistics property industry, but has also spurred industry giants as Prologis and Goodman to speed up the development of their own networks in China, analysts said.

Meanwhile, Tmall will set up a nationwide warehouse network in 10 cities including Chengdu in Sichuan province, Jinhua in Zhejiang province and Tianjin.

JD now has 82 warehouses in 34 cities with a combined space of 1.3 million square meters. It also plans to build logistics centers in Beijing, Shanghai, Guangzhou, Chengdu, Wuhan and Shenyang and expand its business in third-tier cities as well.

For its part, Suning has improved its third generation of nationwide logistics bases while Amazon has also established 11 operation centers with warehouses comprising a total area of more than 700,000 square meters.

Even Tencent is entering into logistics. In January 2014, the Shenzhen-based Internet giant purchased a 9.9 percent stake of China South City for HK$1.5 billion ($195 million).

Foreign investors too are eyeing China’s logistics industry. Since May 2013, the nation has received a total investment of 25 billion yuan ($4.1 billion) from both foreign and domestic investors into its logistics industry. That amount includes 5 billion yuan ($813 million) from Rookie Network, $500 million from the Australia-based property giant Goodman Group and HK$2.82 billion ($370 million) from Alibaba.

A report from Deutsche Bank said demand for earnings is spurring investors' interest in logistics property, which is seen as a reliable industrial property investment. RRJ Capital announced on April 10 that it would join hands with Temasek, a state-owned investor in Singapore, to invest $250 million in the Shanghai Yupei Group, a private-owned logistics property developer. By using the funds, Yupei will develop 3.4 million square meters of rental warehouse facilities by 2017. Yupei received $200 million from the Carlyle Group and Townsend Group in August 2013 to build 17 warehouses.

At the same time, Goodman will redouble efforts to expand its China logistics business by injecting funds of more than $3 billion into the Chinese market in the next three to four years, according to Philip Pearce, general manager of Goodman China. “The investment will be used to build 600,000 to 800,000 square meters of highquality logistics space annually,” Pearce said, adding that the first phase of the investment will be focused on Shanghai, Tianjin, Chengdu, Hefei, Nanjing and Chongqing.

“When we complete the project within four years, our logistics space is expected to climb up to 3.3 million square meters,” he said.