Why investors are looking to industrial for resilience
Investors in Asia Pacific are increasingly looking to industrial assets to satisfy more defensive strategies during the COVID-19 pandemic
In the last six months, investors have raised over US$7 billion targeting Asia Pacific logistics assets, according to JLL. Major transactions and partnerships have included ESR partnering with GIC to form an AUD1 billion build-to-hold fund in Australia, the establishment of a joint-venture between CPPIB and APG with ESR to invest over US$1 billion in Korea, and GLP raising US$2.1 billion for its China Income Fund I.
“Throughout the pandemic, the industrial sector has maintained its defensive investment position and been more resilient to the impact than other sectors thanks to its operation criticality. But, really, COVID has just accelerated many of the longer-term secular trends that are supporting investment into the sector,” says Stuart Ross, Head of Industrial and Logistics, Southeast Asia, JLL. “The inflow of capital has resulted in more complex transactions and greater participation by both established and new investors into the sector.”
In line with the economy, real estate investment volumes in Asia Pacific are down this year, falling 32 percent in the first half of the year from a year earlier, according to JLL data. However, industrial transactions were just 6 percent lower than the same period in 2019, which was a bumper year for the sector.
Given the high demand, investors are pivoting towards platform deals rather than individual assets, says Ross.
“By acquiring a platform, investors are more likely to secure tenant networks and can achieve scale quickly,” he says.
Online shopping makes an impact
During the pandemic, the surge in online shopping – already a major driver for warehouse investment in recent years – has only accelerated rising demand.
“The pandemic will accelerate trends already in play across the sector, such as increased internet penetration rates, expansion of online grocery, omnichannel retailing, and the integration of technology into logistics and warehousing,” says Peter Guevarra.
Looking for more insights? Never miss an update.
The latest news, insights and opportunities from global commercial real estate markets straight to your inbox.
As cities continue to grow across Asia Pacific, so too will the need for warehouses near city centers that provide that last push in getting the goods to consumers.
“Last mile logistics requires sizable upgrades for many investors and is likely to need more investment dollars to meet demand from the region,” he says.
As a result, both investors and occupiers are increasingly shifting focus to delivery optimisation, cross-docking centres, and the use of autonomous vehicles.
“Successful last mile strategies will look to implement innovative solutions, modern processes, digital transformation, and the latest technological developments to meet demands,” says Guevarra. “Urbanization-driven concepts like multi-storey logistics developments will need to be considered more by both investors and occupiers looking to gain a larger footing in the rapidly changing region.”
Traditionally a staple of densely, populated cities with limited logistics land availability and relatively high land prices, multi-storey logistics developments are now emerging in Australia and India, complementing land highly urbanized cities like Tokyo and Hong Kong.
“Logistics is increasingly a longer-term stability story which investors do crave in times of uncertainty,” Ross says. “Capital values are forecast to stay relatively firm, with modest yield compression expected in some markets across the region.”
What’s your investment ambition?
Uncover opportunities and capital sources all over the world and discover how we can help you achieve your investment goals.