The pandemic spurred a sharp rise in e-commerce, causing global supply chain vulnerabilities that underscored the need for greater resiliency. Third-party logistics (3PL) warehouse operators had to optimise supply chain operations, cut costs and utilise new technologies. 3PLs have been highly effective, now dominating demand for industrial & logistics space, impacting real estate fundamentals and warehouse building design, and leading to further industry evolution such as fourth-party logistics (4PL) and reverse logistics.
3PLs have grown globally:
Asia-Pacific: 3PLs accounted for 30%-40% of logistics leasing activity in 2023, with marginal growth ahead. This trend is driven by cost-cutting initiatives and a desire for efficiency amid logistics’ increasing complexity.
United States: 3PL leasing activity accounted for more than 30% of bulk transactions (over 100,000 sq. ft.) since the pandemic’s onset due to significantly higher e-commerce, requiring corresponding warehouse space. Although economic uncertainty has slowed short-term 3PL growth, the long-term outlook is strong. 4PL will drive even more modern warehouse space demand.
Europe: 3PLs have become a larger part of logistics leasing demand, increasing by 10+ percentage points since 2019. During this time, for XXL facilities (warehouses over 50,000 sq. m. or 580,000 sq. ft.), final occupiers have increasingly preferred to control the lease themselves and contract a 3PL to operate the warehouse.
2024 Investor Insights – Country Spotlight Series (Colliers)
2024 is anticipated to be a more dynamic year for the Asia Pacific real estate industry. The ability to act quickly, dig deeply into markets and sectors to identify value, and forge productive partnerships will be key to making the most of the region’s resurgence.
Colliers’ 2024 Investor Insights – Country Spotlight Series aims to provide real estate investors and owners with unique insights into the year ahead and a deep understanding of each market across the region. As investors evaluate their portfolios against the fast-evolving global landscape, this series provides a strategic view on the key market dynamics, outlook and opportunities, along with actionable insights across asset classes in Asia Pacific.
Asia Pacific Real Estate Chief Sustainability Officer Survey (CBRE)
CBRE Asia Pacific Research and the U.S. Green Building Council have jointly launched the Asia Pacific Real Estate Chief Sustainability Officer Survey, which provides insights from landlords and investors across the region on how they are addressing the ESG imperative, the role of the CSO in achieving their goals, and their companies’ level of preparedness in achieving net zero, as well as any obstacles that are hindering progress.Key findings include:
Having a CSO or Head of ESG is seen as essential: More than 80% of sampled landlords and investors have established designated roles for such functions in Asia Pacific.
Asset owners’ net zero target is 20 years later than occupiers: About half of the surveyed asset owners cited 2050 as their target to achieve net zero. However, a separate CBRE ESG survey finds that many multinational occupiers are aiming to reach net zero by 2030.
Adoption of green-certified buildings is accelerating: Asset owners will increase the number of green buildings in their portfolios in the coming three years, although availability of green office space lags market demand.
Asset owners have widely adopted green finance: 75% of surveyed asset owners have adopted green financing for capital-heavy construction and acquisition of green buildings, with Sustainability-Linked Bonds also proliferating.
The Future of Alternative Real Assets in the Asia Pacific: Investor Views & Opportunities
The Asia Pacific real estate landscape is evolving, witnessing a surge in alternative sectors such as data centers and healthcare. A collaborative survey by APREA and CenterSquare Investment Management gathered insights from diverse industry leaders and professionals, revealing a notable inclination towards alternative real estate.
Investors foresee higher potential returns in these sectors over the next 1-3 years, with a strong focus on data centers, healthcare, and multi-family and student accommodations. Challenges include limited stock availability and the importance of operating platforms for optimal returns.
Japan is perceived as the current hotspot, while Indonesia and Thailand emerge as promising markets for the future. The survey emphasizes the need for ongoing education to enhance investor understanding of the evolving real estate dynamics.
Philippines, Malaysia and Vietnam: Growth Opportunities in 2024
In 2024, Southeast Asia’s real estate landscape, influenced by robust economic fundamentals and changing demographics, spotlights growth opportunities in the Philippines, Malaysia and Vietnam. The industrial and logistics sectors, driven by rising e-commerce demand, lead investor interest, with a surge in the wellness and healthcare space.
In the Philippines, industrial real estate gains favor, the luxury residential segment sees a surge, and the office sector anticipates improvement. Malaysia projects a robust 2024, emphasizing industrial, logistics, and data centers, with ESG considerations gaining importance. Vietnam, overcoming economic challenges, shows promise in the industrial sector and expects a tenant-led office market.
Investors eye these markets cautiously, considering interest rate differentials and managing currency fluctuations for favorable risk-adjusted returns in Southeast Asia’s thriving real estate markets.
In today’s dynamic business landscape, where environmental concerns are at the forefront of global discussions, the Indian real estate sector has embraced a transformative shift towards sustainability. One of the pioneering Indian sectors – real estate is revolutionizing the industry through Grade A ecosystems of green office spaces while contributing to a thriving economy. India is currently ranked third in the world with more than 752 LEED-certified properties after China in Canada, basis USGBC Annual list.
A holistic, sustainability-driven, Grade A ecosystem is fostering business growth across India, through several initiatives:
Setting Industry Standards for Green Office Ecosystems The real estate industry’s shift towards sustainability is marked by a growing preference for green office spaces that seamlessly blend eco-consciousness with industry-relevant standards. These spaces are designed with a deep consideration for energy efficiency, resource conservation, and reduced carbon footprint. By incorporating advanced technologies and innovative architectural designs, green office spaces not only promote a healthier environment but also set a new benchmark for industry standards, inspiring others to follow suit in creating sustainable workspaces.
Sustainable Practices at the Core Getting these green standards in place requires collaboration. Real estate professionals, architects, environmental experts, and regulators need to join forces. They will need to establish clear metrics for energy usage, water management, indoor air quality, and all-around sustainability. Certifications offered by esteemed organizations like LEED & IGBC add weight, serving as a seal of approval for genuine green credentials. As the demand for sustainable workplaces surges, these green office space standards are pivotal. Those who construct and use these spaces are shaping a cleaner and greener future.
Preferred Choice for Organizations and Employees Grade A green office spaces’ success transcends mere adherence to environmental benchmarks; they have evolved into the favoured choice for both organizations and employees. In today’s professional landscape, there is profound esteem for spaces that harmonize with sustainability-oriented principles. Consequently, employee preferences for eco-conscious work environments influence organizational decisions significantly. Abundant greenery, natural illumination, and fresh air collectively exert a positive influence on the overall work milieu, fostering heightened creativity, engagement, and job satisfaction.
Fostering Business Growth These practices have not only resulted in positive environmental impact but also spurred humungous business growth and aided economic growth. The adoption of sustainable practices has led to the creation of jobs in various sectors, ranging from renewable energy installation to eco-friendly construction materials.
The influx of businesses into these spaces has led to increased foot traffic in areas within these ecosystems, benefiting local businesses such as cafes, restaurants, and retail stores around. The growth of these businesses, in turn, generates employment opportunities and contributes to the overall economic vitality of the region.
In conclusion On the path to sustainability, the Grade A ecosystems within green office spaces adeptly strike a harmonious equilibrium between modern infrastructure and ecological accountability. However, the influence of these spaces extends beyond environmental preservation. Responsible businesses prioritize eco-friendly and healthy workspaces that align with their values, ensuring sustainable growth in demand for these thoughtfully designed environments.
The real estate market in the Asia Pacific (APAC) region has shown remarkable resilience and adaptability despite the rapidly changing global landscape. Geopolitical advancements in APAC economies have led to a transformation of the real estate sector, with technology and sustainability integration gaining traction. These changes have also impacted the development of fast-paced projects.
As the real estate industry around the world catches up with technology-led innovations, there is a shift towards environmentally friendly building practices due to rising carbon emissions. This shift is evident in the updated real estate regulations in the APAC region for 3QFY24. Many APAC countries, such as China, Singapore, Australia and Japan have introduced green infrastructure and technology-integrating guidelines to address this challenge.
Further, countries like Australia and Japan have shifted their focus from specialised asset classes, such as data centres and cold storage, to Build-to-Rent asset types. While demand from occupiers has weakened due to tighter liquidity, investors have shown a keen interest in commercial and industrial real estate. Moreover, a new theme of inclusivity and equal housing rights has emerged in economies such as Hong Kong and Japan, which is expected to impact other APAC countries in the coming years.
Despite the ongoing challenges, APAC economies present an attractive opportunity for investors due to regulatory updates across various classes and asset types. These economies are expected to play a crucial role in channelling regional investments and development.
Strength Through Diversification: Opportunities Across Asia Pacific (Cushman & Wakefield)
Like other commercial real estate sectors, the industrial sector globally has been buffeted by a variety of headwinds and tailwinds over the past few years. Notwithstanding these near-term fluctuations, the underlying driver for the sector in Asia Pacific is one of growth and expansion. This is being fuelled by several sources which is driving transformative change across the region and is creating a range of opportunities for occupiers, developers and investors alike. However, at the same time there are challenges that need to be overcome for the sector to reach its full potential in the region.
Cushman & Wakefield’s latest industrial report offers a comprehensive view of these drivers and challenges impacting the logistics and industrial sector, as well as put a focus on the trends and provides strategies for key markets such as Greater China, India, and Southeast Asia to help navigate these conditions.
Intra-APAC trade has increased 5-fold in USD dollar values since 2000, further growth is expected which will force supply chains to become more regionally focused.
As mainland China continues to move up the value chain, new manufacturing and logistics hubs are emerging, especially across Southeast Asia and India creating opportunities across the region.
Although labour pools are deep compared to Europe and US, talent is heavily concentrated within the region. At the same time, there is great variability in skill levels, meaning investment in capability and capacity building.
Port throughput capacity also needs to be expanded across much of the region. India and Southeast Asian markets, cumulatively account for 19% of throughput of the world’s top 50 ports, while China accounts for 45%.
Sectoral trends are also driving the need to redesign supply chains to incorporate greater flexibility, automation and resilience while also reducing input costs and accommodating greater sustainability initiatives.
Occupiers of logistics and industrial space can capitalise on these opportunities by expanding into new markets and/or expanding existing facilities to meet the forecast growth in demand. However, they would be well advised to undertake rigorous supply chain mapping and location analysis to help ensure the optimum design of their manufacturing and distribution strategy.
For investors and developers, opportunities will flow from leveraging existing relationships with tenants to aid their expansion through providing bespoke solutions. In turn, this will provide opportunities to deploy capital and expand portfolio sizes.
Despite avoiding a recession in 2023, Singapore continues to face external headwinds from weak growth in major economies. Activity in outward-oriented sectors is thus expected to remain subdued in H1 2024. However, sustained recovery in air travel and tourism, and resilient labour market conditions will support growth in the tourism, aviation-related and consumer-facing sectors. GDP is forecasted to grow 1 – 3% in 2024, faster than 2023’s 1.2% y-o-y growth.
Office
While leasing demand from the tech sector fell in 2023, Singapore’s office market has been resilient, with diversified demand drivers such as consumer, private wealth and flexible workspace sectors. Sentiment could pick up in H2 2024 as interest rates and inflationary pressures ease, economy strengthens, and companies regain confidence to embark on expansionary plans.
Industrial
With some 3PLs in consolidation mode, leasing demand is expected to be more diversified in 2024. Life sciences and technology occupiers remain active in seeking quality spaces, while the manufacturing rebound should translate into more leasing activity by electronics, general manufacturing and engineering firms.
Retail
Ongoing challenges could curtail retailers’ expansionary demand this year. However, Tourism remains a bright spot on the back of a strong pipeline of concerts and events. Expectations of a full tourism recovery, coupled with limited supply completions in 2024, should lend support to retail rents.
Residential
Rental and price growth moderated in 2023 alongside sluggish sales and ample completions. Growth momentum is expected to ease further in 2024 amid increasing resistance to high price points and as the rental market digests higher supply from peak completions in 2023.
Investment
Despite cautious investor sentiments through 2023, there is ample liquidity waiting on the sidelines. Due to its macroeconomic stability, pro-business environment and political-neutral stance, investors remain confident and interested in Singapore real estate assets for portfolio diversification and wealth preservation.
Kemmu Kawai joined Longevity Partners Japan in September 2022 as the Country Director. Based in Tokyo, he oversees all operations and activities in Japan, the Asia-Pacific region and beyond. He brings him more than 16 years of experience in finance where he specialised in real estate and credit investments. Before joining Longevity Partners, he served as a Portfolio Manager at Norinchukin Bank and as Investment Manager at Center Point Development.
