Occupancy rate under pressure, Shenzhen Yan Tian Port REIT awaits market 'spring'
On April 9, Red Earth Innovation Yantian Port REIT held its 2023 annual performance briefing.
Red Earth Yantian Port REIT is one of the first nine publicly offered infrastructure REITs listed in China. Its invested infrastructure projects primarily generate sustained and stable rental income through property leasing, belonging to the warehousing and logistics industry. The main infrastructure projects include high-standard warehouses and bonded warehouses.
According to the latest data, as of December 31, 2023, Red Earth Innovation Yantian Port REIT achieved annual revenue of 130 million yuan, with distributable income reaching 97.18 million yuan. After completing the fund expansion in June 2023 and merging the assets into the fund, the annual distributable income exceeded expectations by 106.08%. Throughout 2023, the fund completed two dividend distributions, totaling 130 million yuan.
In terms of infrastructure operations, the overall performance of the two infrastructure project companies remained strong in 2023. Regarding occupancy rates, as of December 31, 2023, the Modern Logistics Center project achieved an occupancy rate of 95.11%, with an annual average occupancy rate of 98.56%, surpassing the projected rate of 92.89%. The Century Logistics Park project maintained a 100% occupancy rate, meeting the expected target.
Notably, as a pioneer-listed project, the Modern Logistics Center had a 99% occupancy rate in 2022. However, after one year of operation, its occupancy rate dropped by 3.89 percentage points. Moreover, the project's occupancy rate in Q4 2023 also declined compared to the previous quarter.
At the performance briefing, Xie Zhangsheng, General Manager of Shenzhen Port Logistics Company, responded that this was mainly due to the impact of U.S.-China trade tensions, leading to business adjustments by some clients after contract expirations. In October, 26,000 square meters of space became vacant. However, by Q4, the project leased 14,000 square meters, maintaining an occupancy rate of 95.11% as of December 31, 2023.
To stabilize occupancy rates, Xie Zhangsheng further stated that the operator would continue expanding 招商 channels through government-enterprise collaborations to attract potential clients while strengthening communication with existing tenants to ensure stability. Currently, the project's occupancy rate remains steady, preparing for market changes in 2024.
The performance of Red Earth Yantian Port REIT reflects the challenges faced by the warehousing and logistics industry. Influenced by domestic and international economic trends, the sector experienced pressure in 2023, with occupancy rates declining to varying degrees—a trend continuing into 2024.
Lu Di, Deputy General Manager of Shenzhen Port Capital Co., Ltd., also noted that the regional logistics market faces short-term leasing pressure, with some landlords adopting price-volume trade-offs to mitigate supply-demand imbalances, leading to rent declines and 加剧 regional disparities.
For Red Earth Yantian Port REIT, its highly concentrated tenant base serves as a cyclical buffer. Data shows that as of end-2023, the two infrastructure projects hosted 24 tenants. The largest lessee, Shenzhen Port Group Co., Ltd., leased 116,000 square meters (36% of total leasable area) in the Modern Logistics Center under a contract spanning September 1, 2022, to May 31, 2027.
The second-largest lessee, Shenzhen Tongjieli Logistics Co., Ltd., leased 52,400 square meters (16% of total area) in Century Logistics Park from October 2021 to October 31, 2026.
Consequently, Red Earth Yantian Port REIT's rents stabilized. In 2023, the Modern Logistics Center's 配套仓库 and facilities averaged effective daily rents of ¥1.29/m² and ¥1.77/m², respectively, while Century Logistics Park's rates stood at ¥1.29/m² (warehouses) and ¥1.79/m² (facilities). Both projects achieved 100% collection rates.
As the REIT's anchor tenant, Shenzhen Port Group provided rental support. Despite regional rent declines, the Modern Logistics Center saw modest rent increases.
Per fund management, Shenzhen Port Group's contract entered its third year, with warehouse and office rents at ¥39.78/m²/day and ¥53.05/m²/day, respectively. Starting Year 4, rents will adjust annually based on 第三方评估机构 assessments.
By Q3 2023, Yantian FTZ high-standard warehouse rents ranged ¥39.5–41.5/m²/day (warehouses) and ¥53–55/m²/day (offices). Post-negotiation, Year 4 rates were set at ¥41.14/m²/day (warehouses) and ¥53.52/m²/day (offices).
However, Red Earth Yantian Port REIT cannot rest easy. Disclosures show 港口业务关联租户 accounted for 99% of leased space in Q4 2023, with 非关联企业租户 exceeding 47%. Persistent market pressures may trigger lease terminations or rent reductions, posing operational challenges.
Cross-border e-commerce growth may offer respite. Lu Di noted that Shenzhen's logistics market could benefit from 跨境电商 demand and domestic consumption recovery, sustaining stable leasing demand amid 制造业 and live-commerce expansion.
Red Earth Innovation Yantian Port REIT 2023 Annual Performance Briefing Transcript:
Q: Please overview regional market rents.
Xie Zhangsheng (Shenzhen Port Logistics): As of end-2023, Yantian FTZ high-standard warehouse rents averaged ¥39–42/m²/day, with offices at ¥45–55/m²/day. Occupancy and rent escalations hinge on customs policies, shipping 供应链， and 外贸订单. Current demand remains robust, with FTZ occupancy at healthy levels.
Q: Introduce sponsor Shenzhen Port Group.
Lu Di (Shenzhen Port Capital): Established in 1985, Shenzhen Port Group is a municipal 港口产业集团 integrating "port, industry, city" development across six sectors: shipping, marine, logistics, energy, industry, and finance. By end-2023, its assets totaled ¥58.7 billion, with ¥6.7 billion revenue and ¥1.654 billion profit.
Container throughput reached 16.32 million TEUs in 2022. The group operates 51.5km coastline, 14 global port projects, and 89 berths. Shenzhen Port hit 100 million TEUs in 13 years, exceeding 200 million by 2021.
The group is developing marine 新兴产业 at Dachan Bay. Xiaomo International Logistics Port, operational since 2021, aims to become South China's auto-export 滚装枢纽港。
Its logistics portfolio spans 3 million m² nationwide, including 保税仓， standard warehouses, and 冷链仓。
Q: Describe Shenzhen Port's logistics landscape.
Lu Di: As Yantian Port's developer, operator, and service provider, the group offers integrated port and 临港产业 services. Over 1,000 staff support port logistics, with 海运仓储 as a key link.
Q: Explain anchor tenant rent adjustments.
Chen Chao: Shenzhen Port Group leases 116,000 m² (44% of total) in Modern Logistics Center until October 2026. After three years at ¥39.78/m²/day (warehouses) and ¥53.05/m²/day (offices), Year 4 rates will follow 第三方评估机构 valuations.
By Q3 2023, Yantian FTZ warehouse rents were ¥39.5–41.5/m²/day (offices: ¥53–55). Negotiated Year 4 rates settled at ¥41.14/m²/day and ¥53.52/m²/day, showing sustained growth.
Q: Outline logistics reserve assets.
Xie Zhangsheng: With Guangdong-Hong Kong-Macao Greater Bay Area's manufacturing boom, modern logistics 已成为深圳支柱产业. Shenzhen has five major warehouse zones: Qianhai FTZ, Yantian FTZ, Airport Logistics Park, Pinghu Logistics Park, and Longhua Logistics Park. High-standard warehouses concentrate in Yantian and Qianhai FTZs.
Q: Analyze Shenzhen's Q4 2023 logistics trends.
Lu Di: 2023 saw nationwide occupancy declines, though Beijing-Shanghai-Guangzhou remained stable. The Greater Bay Area outperformed with average rents of ¥1.65–1.68/m²/day, driven by e-commerce.
In Q4, Shenzhen's high-standard warehouse rents dipped but stayed resilient. Non-FTZ occupancy fell to 90.4% (QoQ: -4.3%; YoY: -5.8%). Total high-standard inventory reached 899,000 m², with 140,000 m²新增存量 in Yantian.
Q: Why did Q4 occupancy drop?
Xie Zhangsheng: U.S.-China trade impacts triggered tenant adjustments, vacating 26,000 m² in October. Q4 leasing of 14,000 m² maintained 95.11% occupancy by year-end.
Q: Detail fund dividends.
Chen Chao (Fund Manager): Per REITs regulations, annual dividends must exceed 90% of distributable income. The fund distributed ¥130 million via two 2023 payouts.
Q: Regional logistics outlook?
Lu Di: Cross-border e-commerce and domestic consumption recovery will drive demand.制造业 and live-commerce expansion bolster stability, though 短期承租压力 persists. New supply may pressure rents temporarily until economic recovery.
Q: FTZ competitive advantages?
Xie Zhangsheng: FTZs offer policy perks and diversified services. Our operator's 招商能力 has secured stable tenants like 美集物流，德迅物流， and 全球捷运物流. Each warehouse features loading docks for efficiency.
Yantian FTZ Phase II's impending operation will diversify storage options, enhancing the port's 华南枢纽地位。
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