Industrial and Logistics Driving Real Estate Investment Across Asia Pacific

Investors attracted by rapid re-pricing, resilient market fundamentals and compelling structural drivers.

Foto: (Jakarta) – ColliersGlobal Insights & Outlook: Industrial & Logistics (I&L) Report has found USD26 billion worth of industrial and logistics assets have been sold across Asia Pacific year-to-date, with most transactions done in China, Australia, South Korea and Japan. 

Singapore is the top source of global cross border capital for the I&L sector in 2023, while Japan ranked fourth after Canada and the UK. Japan and Australia are among the top 10 global destinations for cross border capital investments in I&L.

The report found a strong expansion of investment in the I&L sector compared to other real estate asset classes, with activity doubling from 12.5% in 2016 to 25% in 2023. This supports Colliers’ Global Investor Outlook  survey conducted last year, which found 60% of investors were looking to invest in a broad range of I&L assets in 2023.

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“While overall investment activity has remained subdued in 2023, monthly investment volumes for I&L assets are trending positively, relative to the five-year range across all regions,” Chris Pilgrim, Colliers Managing Director, Global Capital Markets Asia Pacific, said. “The sector benefits from healthy underlying market fundamentals and compelling structural drivers, fueling occupational demand."

Steve Atherton, Head of Capital Markets & Investment Services mentioned that Indonesia’s I&L market has been growing substantially in the last five to seven years with major regional developers and investors building modern warehouses including  Logos, ESR, Frasers Property, Daiwa, Cainiao, Blackstone, Warburs Pincus, CRE Japan, GIC, Mitsubishi Urban Development and INA (Indonesia Investment Authority).

"The market is getting more competitive with larger and experienced regional players vying for market share with steadily rising quality and density of logistics developments," he said.

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Rivan Munansa, Head of Industrial and Logistics Services mentioned: "in the last two months, we've observed a notable increase in the demand for warehouse leases, mainly driven by the resurgence of e-commerce businesses. This heightened demand for warehouse space is most noticeable in the Jakarta, Semarang, Surabaya, and Solo areas. However, it's worth noting that rental periods tend to be predominantly short-term".

In APAC, key deals in 2023 have included the Blackstone Logistics Portfolio in Japan (USD800million); 42-52 Raymond Avenue, Matraville, Australia (USD87.3million); and 146-154 O’Riordan Street, Mascot, Australia (USD57million).

Gavin Bishop, Colliers Managing Director of Industrial, Australia, said: “value-add capital remains the most active in the market; however, passive investors have recently been undertaking market and sector due diligence ahead of potential acquisitions which include portfolio and re-capitalisation opportunities. A back-log of new supply is coming through across markets, which is softening the supply-demand imbalance and easing the rental growth outlook as vacancy stabilises.”

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Colliers found investors were attracted to yield/cap rate spreads afforded by the rapid re-pricing of I&L assets. Since Q1 2022, industrial assets have re-priced by 107 basis points on average globally, keeping in-line with the outward movement of interest rates. In comparison, office, multifamily, and retail assets have only changed by 69 basis points on average globally.

“This supports investors’ deployment of capital into the sector, particularly for those that are more equity driven with a longer-term horizon,” Michael Bowens, Colliers Head of Industrial, Asia, said.

One of the key factors driving interest and strong repricing into the sector has been its income profile, he added. In each region, rents have been expanding at a moderate-to-fast pace, and consistently year-on-year.

“I&L rents in APAC have expanded by 50% since 2015, particularly since 2021. This can largely be attributed to the overall supply-demand imbalance in industrial space,” Bowens said.

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Unlike other major real estate asset classes, this trend has been consistent in I&L globally, with vacancy rates operating at or below 6% in each region for several years.

Gavin Bishop explained: “in most instances, rents have moved from a historic low-base as net demand for space has expanded and overall requirements have been upgraded to meet growing commercial needs and levels of sophistication. Growth in e-commerce, data centres, and more recently growth in the near/re-shoring of supply chains, have been huge contributors to demand.”

The expansion of e-commerce and data centres are clearly intrinsically linked. As with the I&L sector more broadly, the data centre market remains hot. Data centres remain a key area of growth for APAC, and are expected to reach over USD53billion by 2028 as they expand by 12% annually (CAGR) from 2023 to 2028.

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Shanghai, China (Foto: Dok.
Shanghai, China (Foto: Dok.