Global investors plough into Asian logistics properties as demand for online delivery food surges amid Covid-19 crisis
- Institutional investors, insurance giants and sovereign wealth funds are rapidly increasing their investments in logistics properties in China and the wider region
- Surging demand for online food delivery and grocery services has bolstered demand for warehouse space, say industry players.
ESR is a logistics real estate platform with total assets under management of more than US$22 billion, covering about 17 million square metres of space in Asia.
“Insurance companies, sovereign wealth funds and pension fund mangers have shown great interest in the [logistics] sector and the company, as other property sectors such as retail properties have been under pressure amid the virus outbreak,” Shen said in an interview.
ESR has announced about US$2 billion in new investments via partnerships with global investors this year. They include its joint venture with Toronto-based insurer Manulife, which has around US$900 billion of assets under management globally.
Early this month ESR said the joint venture has bought four institutional-grade logistics properties from Redwood China Logistics Fund for about 1.7 billion yuan (US$240 million).
ESR is not alone in attracting the attention of investors.
China Logistics Property Holdings, whose prime logistics facilities portfolio reached 4.3 million square metres spanning 18 mainland Chinese provinces, announced at the end of June that it has agreed to issue US$100 million of convertible bonds to Boston-based Bain Capital.
The industrial sector reported an 11 per cent drop in transaction volumes year on year in the second quarter, compared to a drop of 44 per cent across all other sectors, according to Knight Frank’s Asia-Pacific report released earlier this month.
Online food delivery and grocery services saw a 400 per cent increase in sales in February during the most acute stage of China’s lockdown, according to JLL. The surge in demand pushed up companies’ need for warehouse space in locations that could help expedite deliveries.
“Most of the new leases come from food delivery services and central kitchens. That accounts for 60 per cent of the newly leased space,” said Shen.
The company has managed to get new clients such as McDonald’s cold chain courier Havi Group as the Illinois-based firm expands its business in China, according to Shen.
Investors have been building up industrial assets in their portfolios in the past four to five years, attracted by the strong demand and stable rental growth, said Brian Oravec, managing partner of IndoSpace Capital Asia, an Indian developer of industrial and warehousing parks.
But the pace of that investment has accelerated as e-commerce has boomed amid Covid-19, Oravec said in a webinar organised by the Asia-Pacific Real Estate Association.
The logistics and industrial sector proved the region’s most resilient in the second quarter.
Rental growth remained positive in Shanghai and Sydney and was largely stable in Singapore, Beijing, Sydney and Melbourne, according to JLL’s research report on July 20. But office and retail leasing were subdued, with rents falling in the second quarter, it said.
