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- Investment in Asia Pacific logistics and industrial real estate is set to more than double over the next three to five years
- According to JLL, logistics and industrial investment volumes will increase to $50-60 billion between 2023-2025, up from $25-30 billion in 2019-2020
- An increasing number of portfolio and mega-transactions, as well as various macroeconomic variables, are all contributing to rising investment volumes
- Given the availability of new modern logistics stock, investment is expected to be strongest in South Korea, Australia and China, the report said
Investment in Asia Pacific logistics and industrial real estate will more than double over the next three to five years as investors seek to diversify their portfolios.
According to JLL, logistics and industrial investment volumes will increase to $50-60 billion between 2023-2025, up from $25-30 billion in 2019-2020.
Due to growing tenant confidence in the industry, investment in logistics and industrial buildings, which include storage, supply chain, and manufacturing facilities, will expand.
JLL’s recently published report A New Trajectory for Logistics Real Estate in Asia Pacific, said the evolution of eCommerce and third-party logistics services have significantly changed both investor engagement and occupier composition within logistics and industrial real estate in recent years.
JLL head of logistics and the industrial Asia Pacific Tom Woolhouse said changes to assets allocations and supply chain networks have accelerated 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 eCommerce growth and technology-enabled supply chains,” he said.
An increasing number of portfolio and mega transactions, as well as various macroeconomic variables, are all contributing to rising investment volumes. Between 2020 and 2025, Asia Pacific’s urban population is expected to grow by 41 million people each year.
During the same time period, an additional 760 million people will enter the middle class, and incomes will increase at a rate of 4 per cent per year, indicating that the industry has considerable development potential.
According to JLL research, logistics funds more than quadrupled their assets under management in 2020 and will continue to grow in 2021.
Even though yields tightened over the previous year, surpassing interest rate reductions, a record number of major transactions were completed in the Asia Pacific logistics and industrial sector in the last six months, including ESR’s purchase of the Blackstone Milestone portfolio in Australia.
JLL head of capital markets research Asia Pacific 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,” she said.
Given the availability of new modern logistics stock, investment is expected to be strongest in South Korea, Australia, and China, the report said.
The infusion of money aimed at these nations, as well as the resilient demand generated by eCommerce penetration, will continue to counterbalance yield compression and strong competition for assets.
According to JLL research, solid demand-supply dynamics will allow for additional yield compression, perhaps by 50-100 basis points.
There is potential for further sale and leaseback transactions in Asia Pacific as a result of the steady rise in core and core-plus funds entering the industry in recent years.
Many owner-occupiers are considering this option in order to free up capital for facility upgrades and the implementation of innovative technological solutions in warehousing and supply chain management, according to JLL.
