Real estate investors remain committed to Asia Pacific logistics assets, despite a slowing global economy and high prices in some markets.

Investment in the sector has grown, with industrial and logistics property overtaking retail to become the second most traded sector in the region. In the year to Q3 2022, logistics transactions totalled $29.5 billion, according to MSCI data, compared with $22.3 billion for retail.  

In the latest ANREV Investment Intentions survey, industrial and logistics was the second most popular real estate sector (behind residential), with 76% of investors looking to buy the sector in Asia Pacific this year. 

Jack Harkness, Director, Regional Industrial and Logistics Services at Savills Asia Pacific, says: “Real estate investors are still very much committed to the Asia Pacific logistics sector, because the long term structural drivers remain in place.  

“However, investors are more cautious. This is driven primarily by concerns about the global economy but also about markets where cap rates have compressed substantially and where interest rates are rising.” 

Last year saw a number of substantial funds raised for the sector, including sector specialist GLP closing a sixth China income fund, raising RMB7.6 billion ($1.05 billion) and listed logistics and fund management group ESR raising A$540 million ($373 million) for an Australian development fund.  

Activity in the sector has continued in 2023, with UK investment manager M&G announcing it spent $267 million increasing its stake in a Japanese logistics centre. Meanwhile, Korean manager Mirae Asset Global Investment bought its first warehouse in Mumbai in January.  

“The prime markets global investors focus on are China, Japan and Australia, however we expect interest in India and Southeast Asia, which are benefitting from manufacturing diversification and consumer growth, to emerge strongly in the future,” says Harkness. 

Last year, Singaporean sovereign investor GIC and ESR formed a $600 million joint venture while this year, ESR bought a stake in Vietnam’s largest industrial and logistics real estate company, BW Industrial. Savills data show logistics accounted for 24% of private equity real estate investment in India in 2022, making it the second most popular sector behind offices. 

Once a slightly grubby and straightforward business, more industrial and logistics niches are emerging, as the sector and its tenants become more sophisticated. These include last mile logistics, smaller urban units close to consumers, and cold storage, which is in demand as Asian consumers demand fresher food and more grocery deliveries.  

Harkness says: “Investors are becoming more interested in logistics niches such as last mile and cold storage facilities. This is partially because they are looking for extra yield but is also due to the increasing sophistication of the logistics market and the evolution of its sub-sectors.”

Further reading:
Asia 2023 Real Estate Investment Tips

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