Despite the occasional stock market correction, with China's economy charging ahead at a new record pace, retailers and industrial property managers are buying and building distribution centres (DCs) as fast as they can acquire land and lay bricks.

"Most companies tend to fill up the space they take within a year," said Trent Iliffe, head of Jones, Lange and Lasalle's industrial property division in China.

"Amazon.com, for example, a US e-commerce company based in Seattle, Washington, took an 11,000 sq m space last year, with an option for another 10,000 sq m and ended up exercising the option within four to five months. This is typical of most retailers."

With large retailers such as IKEA and Wal-Mart sourcing for overseas markets at the same time as they anticipate the coming wave of Chinese consumerism, Iliffe expects this DC trend to continue unabated for at least five more years.

After acquiring a 48,000 sq m distribution centre in Fengxian, an industrial suburb of Shanghai, for US$16 million, Australian property developer, Goodman (formerly Macquarie Goodman) announced that they will spend $2 billion to $3 billion in the next three to five years in developing property in China.

"China presents enormous opportunities for Macquarie Goodman. This acquisition, together with the DHL-Exel development in Kangqiao Shanghai, reinforces our commitment to the Chinese market," said David van Aanholt, Goodman's Asia Pacific chief executive officer.

"China's logistics market (which includes freight, warehousing and distribution centres) is expected to grow by more than 30 percent per year in the next three to five years," said Iliffe. With most 3PLs in China experiencing 40 to 50 percent growth per annum, they frequently pay a premium of two to three times to secure space in the short term.

On a positive note, the Chinese Government's rail expansion plans should ease the DC shortage in the next few years. As part of an aggressive growth plan, the government is establishing strategic rail hubs in different parts of the country to relieve pressure on the eastern seaboard. This improved infrastructure will help establish more DCs outside of the Yangtze River Delta and Pearl River Delta areas.

In the meantime, companies have to plan ahead, even if they don't need all the space at present. IKEA just added 60,000 sq m of space to its state of the art DC facility in Songjiang, Shanghai, giving the company a total of almost 150,000 sq m of storage space.

Currently, IKEA has only four stores in China and has recently opened stores in Japan. Until store capacity ramps up in China Jon Freunfelder, the DC's general manager said that this DC will serve the APAC region, though IKEA's ultimate goal is that the DC will serve just China.

"In keeping with IKEA's promise of having product availability in every store, every day," Freunfelder notes, "IKEA's goal is to ship as much product as possible direct from the supplier, which means that we need to store a range of goods."

When a group of China Supply Chain Council (CSCC) members visited the IKEA facility it was mostly empty, partly because it had just been built and partly due to seasonality, explained Freunfelder. However, he also conceded, IKEA has yet to find the right price point to attract the Chinese consumer. When they do find the right strategy though, it's likely they'll start building again.