Capital Markets

Key Forecasts and Outlook: Logistics & Industrial Market

•Across APAC, demand for logistics space has been supported by a long-run shift from physical to online retailing. COVID-19 has driven up e-commerce volumes sharply, while expansion in the cold chain sector and new infrastructure developments should boost demand further. •Most investors and developers already see logistics warehouses as a core asset class.
•With firm demand and limited supply in China’s Tier 1 cities, tenants and owners may have to seek space and opportunities in locations away from the main centres.
•Japan stands out as underserved by modern logistics stock, even though the small modern logistics clusters (e.g. Nagareyama/Kashiwa near Tokyo and Ibaraki City near Osaka) offer some of APAC’s largest and most advanced warehouses. The low availability of modern units means investors and developers can apply value-add strategies to older stock. It is increasingly common to demolish and rebuild.
•Australia has ample Grade A logistics stock, but it is tightly held and vacancy rates are well below their long-run averages. Investors should be willing to buy a portfolio of assets to achieve scale.
•In India, Mumbai and Delhi NCR have vacancy rates of 10-11%, but the other logistics clusters have vacancy of 15-30%. New supplying 2020 is modest in all markets except Delhi NCR.
•Singapore is one of the best-served Asian logistics markets, with a per capita Grade A stock on a GFA basis of 0.8 sqmetres(versus under 0.2 sqmetresin Osaka or South China). As a result, vacancy is 11.7% and we expect modest average annual five-year rent growth of 0.8%.
•Demand for cold chain delivery is soaring. Looking ahead, we expect that big purpose-built cold chain warehouses will be built near ports and transport hubs, while renovated cold chain warehouses will be located nearer cities for easy distribution. Occupiers and owners will find opportunities in both types.

During 2020, private-equity investments into the Indian real estate sector declined 23% from2019. At this juncture, investors are also eyeing alternate assets, as well as projects that require last-mile funding. Investment firms and global developers are undertaking development risks in India and constructing office parks.

> We recommend investors fund stalled projects in the final stages of construction. These projects mitigate risks as project approvals are already in place.

> We also recommend investors focus on logistics and datacenter assets to take advantage of the growth in these sectors by converting them into a Real estate investment Trust (REIT)offering.