Investments in logistics and industrial real estate in the Asia-Pacific will double in the next three to five years as investors look to increase exposure to the asset class, property consultant Jones Lang LaSalle forecast in a recent report.
It expects the figure to rise to $50-60 billion from the current $25-30 billion.
Logistics and industrial buildings, comprising warehousing, supply chain and manufacturing facilities, would see increased investment due to rising occupier confidence in the sector, it said.
In recent years, due to the evolution of e-commerce and third-party logistics (3PL) services, both investor engagement and occupier composition within logistics and industrial real estate have changed significantly, it said.
JLL Asia-Pacific head of logistics and industrial research Tom Woolhouse noted that across the region, “structural changes to asset allocations and supply chain networks have converged to accelerate logistics sector investor and occupier demand. Increased investment into logistics and industrial real estate mirrors changes in occupier strategies for higher quality assets and the shifting composition towards ‘new economy’ occupiers, based largely around e-commerce growth and technology-enabled supply chains”.
Contributing to swelling investment volumes is a growing number of portfolio and mega deals and several macroeconomic factors.
In 2020-2025, the urban population in the Asia-Pacific is set to rise by 41 million a year, an additional 760 million people will join the middle class, and incomes will grow at four per cent a year, presenting significant growth potential for the sector.
According to JLL research, logistics funds doubled assets under management in 2020 and continued to accelerate further in 2021.
In the last six months a record number of mega deals were done in the Asia-Pacific logistics and industrial sector, including ESR’s purchase of the Blackstone Milestone portfolio in Australia, even as yields fell faster than interest rates in the last 12 months.
JLL Asia-Pacific head of capital markets research Regina Lim said: “The attractiveness of the logistics and industrial asset class will only intensify in the eyes of investors. In reality, institutional investors have just begun strategic reallocation of their portfolios and need to increase their exposure to logistics assets by 40-50 per cent in the near term as they look to allocate capital into stable income producing assets.”
Investment is projected to be strongest in South Korea, Australia and China, given the availability of new modern logistics stock. The inflow of funds focused on these countries and resilient demand from e-commerce penetration will continue to offset yield compression and stiff competition for assets.
According to JLL analyses, robust demand-supply dynamics will support further yield compression.
Vietnam, currently one of the fastest growing e-commerce markets in Southeast Asia, saw a massive acceleration in 2020-2021 as shoppers stuck at home flocked online.
JLL country head for Vietnam Paul Fisher said: “Logistics is crucial to the future success of the Vietnamese e-commerce market. Many foreign logistics providers are making efforts to meet the rapidly growing needs of the market.”
Due to the consistent increase in core and core-plus funds coming into the sector over recent years, there is potential for more sale and leaseback transactions in the sector across the Asia-Pacific.
Many owner occupiers are exploring this option to free up capital expenditure to upgrade facilities and implement new technological solutions for warehousing and supply chain management.
JLL Asia-Pacific research director Peter Guevara said: “The increasing adoption of technology and automation solutions coupled with a better understanding of the rising importance of environmental, social and governance and human-centric design requirements all point to a new trajectory for the logistics sector.
“Ultimately, this new trajectory is changing the occupier mix significantly and supporting the investment thesis for prime, modern logistics real estate.”
Fisher noted that Vietnam’s logistics market is still in a relatively nascent stage, and voiced optimism that “driven by growth in the e-commerce and manufacturing sectors, as well as growing domestic consumption … [it] will continue to thrive and evolve in the same way we have witnessed in other markets”.
VIET NAM NEWS/ASIA NEWS NETWORK