Outlook for Asia-Pacific logistics assets looks bright next year as investors chase yield amid low interest rates

Property investment in Asia-Pacific is set to rebound by 15 to 20 per cent in 2021, with logistics emerging as the key growth driver amid continuing demand from grocery retailers, health services firms and e-commerce providers, according to JLL.

In a low-return and low-interest rate environment, logistics is likely to triumph offices in most Asia-Pacific markets as investors hone in on yields next year, the property consultancy said. Investments in build-to-rent multifamily residential properties, such as student housing, co-living and senior care, will also gain pace in 2021, it added.

Stuart Crow, chief executive for Asia-Pacific capital markets at JLL, said that transactions had rebounded in the latter part of this year and will accelerate in 2021 as investors reaffirm their commitment to increasing exposures to Asia-Pacific real estate.

“Longer term, the investment outlook remains incredibly positive given the expectation for continued low interest rates, huge amounts of dry powder and the insatiable hunt for yield,” Crow said.

In Asia-Pacific, the logistics sector has remained resilient despite the global pandemic. In the first half of 2020 while overall property transaction volumes fell 32 per cent year on year, logistics facilities only saw a 6 per cent drop in volumes, JLL data published in September showed.

The coronavirus pandemic has accelerated many megatrends that have bolstered the industrial property market, such as data centres and facilities related to self-storage and medical goods, according to real-estate investment fund manager Nuveen Real Estate.

“[These trends] will continue to benefit from capital flows owing to expectations of positive long-term demand and limited supply,” it added.

In China, demand for logistics facilities remains strong, particularly in Dongguan, a city in the Greater Bay Area, according to Colliers International.

“Dongguan, as a highly industrialised city with extensive highway and railway networks, has been capturing investors’ interest,” said Rosanna Tang, head of research at the property consultancy. She said that demand has been strong in Dongguan for logistics facilities because of its large consumer base and good location with easy access to leading bay area cities like Guangzhou and Shenzhen.

The Asia-Pacific region has seen a flurry of logistics investment activity recently. Last Tuesday, Asia’s largest logistics real-estate company ESR Cayman announced a US$750 million joint venture with Singaporean sovereign wealth fund GIC to invest in India’s industrial logistics assets.

The joint venture will develop industrial and logistics facilities, and acquire assets in India’s tier one and two cities. The venture will also be seeded with assets of around 2.2 million square feet located near Mumbai and Thane, a city just outside India’s financial capital.

“Continued e-commerce growth in India over the long term, reinforced by rising internet penetration, is expected to drive strong demand for industrial and logistics assets,” said Kishore Gotety, GIC’s co-head of real estate for Asia ex-China.

Meanwhile, Hong Kong-based Kerry Logistics Network’s Thai subsidiary is planning to expand its parcel delivery network in the Southeast Asian nation.

Kerry Express Thailand, which raised 8.4 billion baht (US$275 million) through the sale of 300 million shares on the Stock Exchange of Thailand last Thursday, also plans to invest in its own transport system and improve operational efficiency.