APAC logistics & industrial investment poised to double within 5 years

 Investment into Asia Pacific logistics and industrial real estate will double within the next three-to-five years as investors look to increase exposure to the asset class. JLL (NYSE: JLL) forecasts logistics and industrial investment volumes to rise to $50-60 billion between 2023-2025 from US$25-30 billion in 2019-2020.

Logistics and industrial buildings, which comprise of warehousing, supply chain and manufacturing facilities, will see increased investment due to rising occupier confidence in the sector. In recent years, due to the evolution of e-commerce and third-party logistics (3PL) services, both investor engagement and occupier composition within logistics and industrial real estate has changed significantly, according to JLL’s recently published report A New Trajectory for Logistics Real Estate in Asia Pacific.

“Across Asia Pacific, structural changes to asset allocations and supply chain networks have converged to accelerate logistics sector investor and occupier demand. Increased investment into logistics and industrial real estate mirrors changes in occupier strategies for higher quality assets and the shifting composition towards ‘new economy’ occupiers, based largely around e-commerce growth and technology-enabled supply chains,” says Tom Woolhouse, Head of Logistics and Industrial, Asia Pacific, JLL.

Contributing to swelling investment volumes are a growing number of portfolio and mega deals and several macroeconomic factors. The urban population of Asia Pacific is set to rise 41 million per year between 2020 and 2025. In the same period, an additional 760 million people will join the middle class, and incomes will grow 4% per year, presenting significant growth potential for the sector.

According to JLL research, logistics funds doubled assets under management in 2020 and continued to accelerate further in 2021. In the last six months, a record number of mega deals transacted in the Asia Pacific logistics and industrial sector, including ESR’s purchase of the Blackstone Milestone portfolio in Australia, even as yields compressed over the last 12 months, outpacing interest rate declines.

“The pandemic has forced diversification,” says P. Ryan Isip, Head of Capital Markets, JLL Philippines. “Developers in the Philippines are looking to diversify into industrial & logistics, with most of the inventory demand being in office and residential developments,” he adds.

In JLL Philippines’ recent real estate market overview, Janlo de los Reyes, Head of Research and Consultancy said that the logistics and industrial sector continues to be a bright spot in the real estate market. Logistics & industrial transactions volume grew by 47%, outshining other asset classes as demand continues to increase and rent remains stable. As e-commerce continues to be the consumer platform of choice for many Filipinos, urban logistics demand continues to grow. We are also seeing growth of third-party logistics firms seeking spaces within and outside metro areas.

Due to the consistent increase in core and core-plus funds into the sector over recent years, there is potential for more sale and leaseback transactions in the sector across Asia Pacific. Many owner occupiers are exploring this option to free up capex to upgrade facilities and implement new technological solutions into warehousing and supply chain management.

“The increasing adoption of technology and automation solutions coupled with a better understanding of the rising importance of Environmental, Social and Governance (ESG) and human-centric design requirements all point to a new trajectory for the logistics sector. Ultimately, this new trajectory is changing the occupier mix significantly and supporting the investment thesis for prime, modern logistics real estate,” says Peter Guevarra, Director, Research, Asia Pacific, JLL.

JLL has been operating in the Philippines since 1997 as a 100% wholly owned entity and currently manages about 4.4 million square meters of real estate with a workforce of over 1,100 employees. With more than two decades of local expertise working hand-in-hand with its global legacy, JLL provides to the Philippine real estate market an unparalleled synergy of services with a strong commitment to achieve real estate ambitions through future-ready approaches. For further information, visit www.jll.com.ph.