Despite higher-for-longer interest rates, Asia-Pacific logistics real estate investors remain interested. GIC bought six Japanese logistics businesses from Blackstone for around US$800 million last month. Major logistics investors are confident in this high-profile acquisition.
Mapletree Logistics Trust (MLT) acquired eight logistics businesses in Apac for close to US$700 million in March. GIC and MLT’s purchases demonstrate logistics investors’ growing expertise and appreciation of the sector’s development potential.
Major Apac logistics transactions
Logistics, like all industries, must adjust to the post-pandemic environment. After a record 2021, Apac logistics real estate investments fell by about 20% in 2022.
| Period Completed | Property | Market | Price (US$) | Buyer | Seller |
|---|---|---|---|---|---|
| 2022 Q1 | Dexus Australian Logistics Trust (49% stake) | Australia | 1.5 billion | Blackstone | GIC |
| 2023 Q2 | Blackstone Japan Warehouse Portfolio | Japan | >800 million | GIC | Blackstone |
| 2023 Q2 | CBRE IM Logistics Portfolio | Japan/Australia/ South Korea | 687 million | Mapletree Logistics Trust/Mapletree Investments | CBRE IM |
| 2022 Q2 | China Logistics Property | China | 513 million | JD.com | China Logistics Property |
| 2023 Q1 | ESR Ichikawa Distribution Centre (1/3 stake) | Greater Tokyo | 267 million | M&G Real Estate | ESR Cayman |
While the quick surge in fund costs catching up to yield compression during the pandemic has deterred investors, overall investments of approximately US$40 billion remain larger than ever before 2021.
E-commerce was essential during the epidemic, but after it ends, online sales concentration will decrease. Online shopping will continue popular because of its convenience, even as more people shop in stores.
Panic purchasing to shoppertainment
The pandemic spurred e-commerce adoption, setting the groundwork for its next phase of expansion. New marketing channels will increase digital engagement after the epidemic fostered familiarity.
Shoppertainment was a pre-pandemic marketing strategy that took off after worldwide lockdowns. Entertainment and e-commerce together provide an engaging and personalized buying experience.
TikTok and Boston Consulting Group expect Apac e-commerce gross market value to reach US$3.5 trillion by 2025, up from US$2.6 trillion in 2022. New digital engagement methods like shoppertainment, anticipated to be a US$1 trillion market by 2025, are driving this 10% compounded annual growth rate over three years.
Supply chain modernization
Due to supply-chain bottlenecks, logistical delays, rising costs, and the energy crisis, just-in-case methods have replaced just-in-time techniques, making supply-chain resilience the main goal. Zero-Covid policy in mainland China showed the risk of centralizing production, leading corporations to move industrial hubs closer to their end markets.
The recent American Chamber of Commerce in Shanghai annual business study found that one-third of the 307 businesses questioned have already diverted their China investment. While disruptions have abated, Capgemini Research Institute and Global Investment Research found in a December 2022 study that disruptions lasting or worsening in the next six to 12 months remain a risk.
South-east Asian and Indian supply-chain networks are growing as mainland China’s production costs fall. These markets also provide access to the increasing middle class, digitally aware youth, and mainland China.
Stress ESG
After the epidemic, ESG problems have garnered attention. Despite strong logistics market fundamentals, disregarding the benefits of sustainability efforts today risks losing out now and in the future.
The Singapore Institute of Real Estate and Urban Studies revealed that green-certified logistics facilities performed better and had less valuation declines during the pandemic than non-green buildings. Green logistics and warehouse facilities had an average value boost of 12.7 percent, compared to 4.9 percent for non-green properties.
To satisfy expectations, outdated facilities must be modernized. Inefficient buildings can lower rental value, returns, and exit yields, as well as increase operational expenses.
Shortage creates possibilities
These long-term structural tendencies should propel the region’s logistics industry. E-commerce requires three times more logistical space than brick-and-mortar retailers. Thus, by 2027, Apac will need 4.2 billion square feet (390.2 million square metres) of logistical space. The State of Logistics Asia-Pacific: Focus Report 2023 by Knight Frank found that just 20% of the required capacity is available.
Regional stock will climb 10.5 percent in 2023, but it won’t be enough to support e-commerce development. The existing structural undersupply, compounded by development delays, will drive rental and price rise over the next three to five years. This allows investors to use a variety of strategies across the risk spectrum and asset types in the logistics ecosystem to position for long-term success.
Knight Frank’s surveys also show considerable investor interest in the sector, regarded for its defensive features and exposure to the region’s demographic megatrends, making facilities serving major metropolitan areas particularly desirable. The buyer-seller deadlock is unlikely to endure as the hiking cycle shows indications of exhaustion.
Since 2021, yields have increased 40–50 basis points in most areas. In the following two years, we expect more motivated sellers as 2019–2020 vintage assets reach their five-year refinancing and departure horizons. Contrarian methods may yield first-mover advantage, and repricing offers entry chances.