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Investors are attracted by strong occupier demand for logistics properties, and higher yields relative to other forms of traditional real estate.
In Asia Pacific, drivers of growth for logistics and warehousing space include demand from third-party logistics operators and e-commerce companies.
Direct real estate transaction volumes in the industrial sector totaled US$13.8 billion in 2016, based on data from Real Capital Analytics (RCA).
Five markets (Australia, Japan, Hong Kong, Singapore and China) accounted for over 80 per cent of industrial investment volumes regionally in the 2011-2016 period. In comparison, India and emerging Southeast Asia accounted for less than three per cent of volumes.
Logistics stock in Asia Pacific more than US and Europe combined
Growing logistics stock presents more options for investors, and enables easier entry into or exit from a market.
Based on our estimates, total amount of stock in the seven largest logistics markets in the region currently totals more than 1.5 billion sqm (gross floor area), more than the United States (795 million sqm) and Europe (260 million sqm) combined.
However, stock size varies vastly across markets as regional economies are at very different stages of development. In addition, prime facilities consists of just a small portion of the regional stock.
The definition of prime stock differs across markets because of factors such as stock availability, occupiers and investors’ requirements. But the main criteria involves newer stock (less than 10 or 20 years old), as well as larger space (cutoff point may differ) that is primarily for lease.
Australia has 29.1 million sqm of logistics space that is generally modern, but a lot of the stock in East Asia comprises of older facilities and the majority is owner-occupied. Currently, less than 5 per cent of the total stock in China and Japan consists of investment-grade facilities for lease.
Logistics stock in Asia Pacific to continue growing
More high-specification modern logistics facilities will come online over the next few years. Large logistics space for lease is growing rapidly in China and Japan.
Meanwhile, logistics real estate in India is also growing, fueled by the growth of the e-commerce sector, economic revival, implementation of the Good and Services Tax and government initiatives.
Large planned investments in road, rails, ports and airways across emerging Southeast Asia will bolster trade and warehousing demand, and consequently make more modern facilities available.
For more information, download our “Growth in logistics sector luring investors in Asia Pacific” report today.